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Buying a Home in The 21st Century-Chapter 7

By
Claudette Millette

Broker, Owner -- The Buyers' Counsel
Exclusive Buyer Brokerage
508-881-6230

www.TheBuyersCounsel.com
 

Chapter Seven

   What You Can and Cannot Expect to be Disclosed

About A Property

    The old rule about purchasing real estate used to be caveat emptor: "Let the buyer beware."  Today, with revisions to laws, including laws of disclosure, some of this responsibility has shifted to place more responsibility to the real estate broker and seller. 

Real Estate Disclosure Laws

    Until the 1960s people purchased properties without the advantage of property disclosure laws. Gradually, more states have adopted their own rules to protect the public. In most states now, the broker has a duty to advise buyers of known property defects and there has been a great deal of encouragement for all listing brokers to have their sellers fill out property disclosure forms.

    Presently, mandatory property disclosure is the law in Alaska, California, Connecticut, Delaware, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland, Michigan, Mississippi, Nebraska, Nevada, New Hampshire, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Virginia, Washington and Wisconsin.

    In Nevada, for example, they have an actual "Lemon Law" with regard to real estate purchases.  The seller must fill out their mandatory disclosure form.  If at any time during the transaction, the buyers discover a defect that was not on the form or is worse than was indicated previously, they may get out of the transaction with all deposits returned.

    In California a seller must have the property inspected before putting it on the market and must tell the buyer of any hazardous conditions that the property is on such as a mudslide area, earthquake zone, flood hazard zone, wild-land fire area or seismic hazard zone.

    Many states now make it compulsory that a seller fill out a Seller Disclosure Statement.  In Massachusetts; however, it is still voluntary.

    That having been said, you may well purchase a property that is listed with a real estate company with its own rules about property disclosures.   Many agencies require their agents to have sellers fill out a form when they take a new listing.  They will require that buyers sign a copy of the disclosure form.   This is not done for a validation from you, but, simply to acknowledge that you have received and read the sellers' property disclosure.  

     If you are presented with a seller disclosure, be sure to keep a copy of  it with your home purchase file.  If problems occur at a later time, you will have a record of what the sellers claimed to be true about their property.

 

    Chapter 93A – The Consumer Protection Act

      In 1968 Massachusetts adopted Chapter 93A which provides greater protection for  consumers.  The law states that the use of  "unfair or deceptive practices" is illegal and it applies to any area in which a consumer may be affected.  This includes debt collection practices, landlord-tenant actions and sales tactics.

     With regard to the sale of real estate, some precedent setting cases have guided the way in which 93A applies.  The Regulations of the Attorney General state that an unfair or deceptive act is committed if a person  ..."fails to disclose to a buyer or prospective buyer any fact, the disclosure of which may have influenced the buyer or prospective buyer not to enter into the transaction."

 

What does this mean to you?

    With the threat of possible lawsuits looming, listing brokers know that they must disclose any fact they are aware of which may have an influence on anyone's decision to purchase a property.   Some of these could be roofing problems, wet basements, zoning violations, unpaid betterment charges, underground oil tanks and structural problems. 

    Because of  93A, when a property goes through a home inspection and the potential buyers opt out of the deal due to something revealed in their inspection, that fact must be disclosed to any potential future buyers.

     For example:   A home inspection reveals that a house needs a new roof . The buyers decide not to purchase the property.  That property must go back on the market with a disclosure in the listing specifically stating that it needs a new roof.

 

  Limitations of 93A

           1. Where a broker makes no representation, but has knowledge of a problem, the broker will be found liable for failure to disclose the problem, even if the buyer makes no inquiry, but,

           2. Where a broker makes no representation because he has no knowledge of a problem, he will not be found liable if the problem is one which a judge decides that a "reasonable" broker should not have known.

     The case of  Nei v. Burley in 1983, ran contrary to the above ruling.  In Nei,a broker had been charged with a violation of Chapter 93A.  It was alleged that he had represented that a parcel of land was suitable for building a home and "ready to go."   After their purchase, the buyers discovered that, in order to install a septic system in accordance with the state sanitary code, they would need to purchase landfill.  The landfill was necessary due to a high water table level which had not been disclosed to the buyer.   The buyer sued with the charge that the broker should have disclosed the water table problem.

     Although the broker had been given an engineer's test results which would have indicated to an "informed person" that fill would be necessary for a septic system installation, the Supreme Judicial Court  ruled that there was no evidence that a "reasonable" broker should have known that fact from those tests.  No evidence had been offered to prove that the broker should have understood the test's implications, therefore, the Court ruled in favor of the defendant.  

     A  case which supported the 93A ruling was  Piers, et al v. Wheeler & Taylor, Inc.   

     In this case, the buyers had decided to purchase a house and contacted  a real estate firm they had dealt with previously.    The firm assigned one of their brokers to work with the them.  The buyers told the broker that they wanted to buy an old house but made it clear that the house was to be lead free.  The broker showed them a house that was owned by a fellow agent at her company who also assured them that the property had been deleaded.  

     The house had been extensively renovated and the seller assumed that this fact would have negated the possibility of it having lead paint; however, she had never actually had a lead paint inspection. When filling out the property disclosure form, the seller checked "no" next to the question of whether or not the house had any lead paint.  The listing broker never questioned the response by the seller and never asked for a Lead Paint Certificate of Compliance.  

      Due to the fact that they had two small children, the buyers stressed to the seller, outside of the broker's presence, that their need for a deleaded property was paramount.  The seller did not deny to them that the house had been deleaded.   Due to this interaction as well as the statements made by the broker, the buyers had their regular home inspection but did not have the property tested for lead paint. 

     As the closing was approaching, the agency sent a lead paint disclosure form to the buyers to sign.  They insisted that they would not sign the form since it did not apply to them.  They had been assured they were buying a deleaded home.  Even when the broker insisted to them it was "just a formality" they still refused to sign.  

     Six months after closing on the home, they took their younger son to the doctor for a checkup.  After examining the child, the doctor came to the conclusion that the little boy had lead paint poisoning.   They filed a lawsuit against the brokerage firm, the broker and the seller.  They alleged deceit, breach of contract and violation of Chapter 93A.     

      As to the 93A violations, the judge ruled that the broker's conduct had been particularly egregious and ordered her to pay treble damages to them.  Because she was an experienced broker, she should have known the dangers of lead paint to small children, and, by trivializing the disclosure form and telling the buyers that the house had been deleaded, she caused them to make a decision to not have the house tested for lead paint. 

     "The seller warranted in writing that the premises were free of lead paint, and the broker went one step further by orally informing the buyers on more than one occasion that the house had been deleaded," the judge stated.  "Both statements were clearly false, and I rule that they constituted the type of  unfair or deceptive acts or practices' proscribed by Chapter 93A, Sect.2."*

 

*Source material for Piers v. Wheeler & Taylor from "Broker Liable Under 93A For Lead Paint Damages" reprint from Massachusetts Lawyers Weekly February 16, 1998.

 

 

     

Amendment to Chapter 93A

     On August 11, 1998, Chapter 294 of H 2099  was signed into law. This amendment states that  "The fact or suspicion that real property may be or is psychologically impacted shall not be deemed to be a material fact required to be disclosed in a real estate transaction..."

Such facts would include:

                    -- That the property was the site of a murder or suicide;

                    -- That the property has been the site of a supernatural

                                             phenomenon (such as ghosts). 

     Some people are not comfortable moving into a house that has been the site of  an illness or misfortune.   There can be fear associated with property that has had an assault or murder take place in it; sometimes, a fear that the perpetrator may return.  Unfortunately, 93A does not force realtors to disclose this information unless they are specifically asked.

     On your own, you can go to the town or city hall and inquire about these concerns.  In a small town, ask the people at the assessor's office if they know of anything with regard to the subject property.  People in small towns generally know what has transpired in their town.  

     In general, if you have any concerns about a property that you want to purchase, ask the question that is on your mind.  When confronted with a specific question, a broker must provide an answer to you if there is any way that he or she could have possibly known it.  

     Without questioning, a listing broker is really only liable to disclose facts that have actually been made known to him or her.   This may be from the broker's own knowledge or as a result of information supplied by the seller.  A seller agent is under no obligation to look for potentially negative facts about a property.

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