Anyone who has bought or sold a house in the last several years has seen the Disclosure forms that are attached to most real estate contracts today. Even states where it is not required to have these Real Estate Disclosure Addendums have them as a routine practice.
What Is A Disclosure Form?
Every real estate board probably has a little different version. But in the broadest scope a Disclosure Addendum is designed for the Seller of a property to “disclose” anything they know about a property that a potential home Buyer would want to know. Some example items would be;
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Is their a pending lawsuit (construction defects, etc)?
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Is the house in a blasting zone?
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Does the house have a chronic sewer line back-up problem?
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Is the house haunted?
Each of those examples given, amongst literally hundreds and hundreds more, are items any potential Buyer would want to know. And laugh if you will on the last one. But I read about a case where the courts ruled the Sellers should have notified the Buyers that they thought the house was haunted.
Buyer Beware!
The fact is, as an owner of property, you are required to disclose your material knowledge of the property condition, pending litigation, and the like. The exception to this is to not disclose at all and let the buyer beware (caveat emptor). Of course, the buyer may be suspicious of your unwillingness to offer a property disclosure. So, what are you to as as owner with material knowledge of possible problems (including but not limited to pending or current construction defect lawsuits)? My answer…… do the right thing and disclose. In most cases, a transparent conversation will be appreciated by the prospective buyer and will keep you (the owner) out of trouble in the future.
Not disclosing this issue when you have a material (relating to, concerned with, or involving matter) knowledge of a problem is asking for trouble. Yes, you may have sold the house but quite possibly at a greater cost later on when you get sued.
Ignorance is not bliss
As of today, I am aware of one particular neighborhood that has had less than 5% of all homes listed for sale with disclosure forms reflecting a pending lawsuit. Is it possible that the owners are not aware of pending litigation? It is possible but not plausible when all owners have received more than one written correspondence with regard to a lawsuit.
Can you plead ignorance? I am not an attorney and don’t play one on TV so I am not able to provide legal advise. But, if a plaintiff can prove that you should have known about a pending lawsuit, you will most likely spend a lot of money trying to defend yourself by hiring an attorney.
Disclose, Disclose, Disclose!
In the end, checking one little box on your disclosure form can save you the hassle of a lawsuit. If the checked box is questioned, he honest and say that your are aware of a pending lawsuit. If you don’t know the specifics of the lawsuit, say so. The buyer can do some of their own due diligence and make an informed decision.
