Property Condition Disclosure Highlights: 1Q 2016

A. Cases

1. The Finest Place, Inc. v. Skidmore, 477 S.W.3d 745 (Mo. Ct. App. Jan. 25, 2016)

The purchasers of a mobile home park brought claims against the sellers and the seller’s representative for failure to disclose problems with the park’s water system. The trial court entered judgment against the sellers and awarded damages, but denied purchaser’s claim against the licensee and the broker.

On appeal, the court reversed the decision with respect to the licensee and the broker. If the licensee knew about the water system problems prior to closing, she could be held liable for fraud and misrepresentation. During the trial court proceedings, the court concluded that the licensee learned about the water system problem either “prior to closing or just after the closing.” The appellate court remanded the case back to the trial court for a factual determination as to whether the licensee knew about the problems before closing on the property.

2. Raffield v. Hursh, No. A15-0828, 2016 WL 456949 (Minn. Ct. App. Feb. 8, 2016)

The purchasers sued the seller and seller’s representative for allegedly misrepresenting that there were no drainage problems on a section of the property and that the property was buildable. There was no evidence that seller’s representative knew his statements about the property were false.

The court stated that a licensee cannot be held liable for relying on the seller’s representations if he did not know they were false, and there was no evidence to suggest the licensee should have known of a problem with the property. Further, the purchasers’ negligent misrepresentation claim failed because the licensee did not owe a duty to the purchasers. Summary judgment for the licensee was affirmed.

3. Long Rockwood VII, LLC v. Rockwood Lodge, LLC, No. 2:14-CV-00318, 2016 WL 335853 (D. Idaho Jan. 26, 2016)

The purchasers of Rockwood Lodge brought claims against the sellers for allegedly failing to disclose rotting wooden substructures in deck balconies at the lodge. Prior to closing, the sellers sent a letter to the purchasers’ real estate broker, asking him to forward the letter to the purchasers. The parties disputed the extent of the disclosure in the letter. The letter disclosed an issue regarding sealing of the decks, but according to the purchasers, the letter was misleading because it suggested the issue was one of routine maintenance rather than a major repair project.

The court granted summary judgment for the sellers on most of their claims, but allowed the fraud and fraudulent concealment claims to proceed. The court held that a jury might conclude that the letter was misleading. The court also noted that the adequacy of the broker’s disclosure of the letter to the purchasers could be an issue to be decided in the case, but the court did not reach that issue in this decision.

B. Statutes and Regulations

Virginia

Virginia recently amended the statute setting forth the disclosures to be provided by the seller of property. The revised disclosure form indicates that the owner of property makes no representations regarding adjacent parcels of property “including zoning classification or permitted uses of adjacent parcels.”[1] The seller also makes no representations regarding “covenants or restrictions as may be recorded among the land records affecting the real property or any improvements thereon.”[2]

C. Volume of Materials Retrieved

Property Condition Disclosure issues were identified 12 times in nine cases (see Table 1). The cases addressed issues of Structural Defects, Sewer/Septic, Mold and Water Intrusion, Pollution or other Environmental Issues, and Boundaries. One statute regarding Property Condition Disclosure was retrieved this quarter.