June is National Homeownership Month and a good opportunity for would-be homebuyers to carefully consider the legal factors that go into buying property.
Buyer beware, also known as the doctrine of caveat emptor, is an age-old doctrine. It means that, if you intend to buy property, you generally bear the responsibility for finding out about the property’s condition before purchasing it. This doctrine appears to place the entire risk on the shoulders of the homebuyer, but only does so if 1) the condition of the property is open to observation or discoverable upon reasonable inspection to the buyer; 2) the buyer had the opportunity to examine the property; and 3) there is no fraud or wrongdoing on the part of the seller.
Home defects and inspections
The buyer is responsible for making efforts to obtain all information about obvious defects or problems with the property. A defect that is open, observable and can be discovered through inspection and inquiry is called a patent defect. As the buyer, you will be held responsible and liable for all defects that you could have discovered upon inspection, so make sure you make reasonable efforts to view and inspect the property before buying it.
For example, you may notice such patent, obvious defects as large cracks in the concrete foundation of the home, a hole in the roof or rotten wood on the home’s front porch. If you decide to buy the home in spite of these obvious defects, you could not later seek damages or a remedy against the seller for the costs of repairing them. The burden is on you to notice these issues before buying the property.
The home may also have latent defects that are known to the seller but cannot be easily discovered by the buyer or may present a dangerous condition. These defects are inherently hidden. As an exception to the doctrine of caveat emptor/buyer beware, sellers must disclose latent defects to the buyer. This requirement provides protection for homebuyers.
Latent defects are more complex than patent defects. For example, if a leaking roof can only be noticed when it rains, and an inspection shows no evidence of water damage, this would be a latent defect. Similarly, if a septic tank produces a bad smell occasionally, this would not be a readily observable problem. In such instances the burden falls on the seller. If the seller fails to disclose such issues, the buyer can seek a remedy if necessary, in court.
A seller is also liable for fraud or misrepresentations to the buyer. For instance, a seller cannot lie and tell the buyer the foundation is in great condition if the seller knows it is in need of repair or in danger of collapsing. Similarly, a seller cannot tell a buyer a roof has never had any leaks if the seller has replaced the ceiling’s drywall and paint to conceal the fact that the roof leaks every time there is a severe storm.
In certain circumstances, a seller does not have to disclose latent defects. If a real estate agreement contains an “as-is” clause, then the buyer assumes the risk that latent defects may exist. An “as-is” clause relieves the seller of any duty to disclose, and means the buyer cannot bring a lawsuit against the seller for any passive non-disclosure. For example, in a 2009 Ohio case, a court held that sellers had no liability under an “as is” home sale contract for failing to disclose the existence of a steel support structure that was installed in a basement wall after the wall had sustained water damage.
It is very important to retain a licensed property inspector to examine the property before purchase, and to make the purchase agreement contingent upon the property passing inspection. An inspector has the knowledge, skills and experience necessary to thoroughly evaluate the property and notice issues you may never discover until it is too late.
How an attorney can help
An experienced real estate attorney is well-equipped to prepare and review documents related to property purchases such as purchase agreements, mortgages, title documents and transfer documents. Real estate lawyers also have relationships with trusted service providers and can recommend inspectors and other professionals to ensure that the home is in good condition before any purchase goes through. If latent defects are found after a sale, an attorney will work in the interest of his or her client to gather and present evidence of the lack of disclosure if the matter makes it to a courtroom.
Andrew Smith is a partner in the Cincinnati office of Rolfes Henry Co. LPA and concentrates his practice in the areas of construction law, product liability and insurance “bad faith” litigation. He has extensive experience in state and federal courts throughout the country and is involved in numerous organizations connected to the construction industry. He is an active participant on the Construction and Insurance Law Committees for CLM, the Ohio Association of Civil Trial Lawyers and the Defense Research Institute. Smith also takes an active role with Allied Construction Industries and the Home Builders Association of Greater Cincinnati and is the creator of the construction law blog, Between the Law and a Hard Hat.