Estate and mortgageHousing Counsel: When Your Seller Lies
Question: Just about one year ago, we purchased a two-story Virginia townhouse with a basement. A couple of weeks later, Hurricane Charley brought heavy rain and our basement flooded and our patio pooled. We called the previous owners to inquire about the sump pump, and they came over and were very helpful. They also told us that in the many years they owned the property, there was never any flooding.
Well, we discovered that they lied to us, and that they had several episodes of flooding -- both inside and outside the house. Our neighbors advised us of these facts, and some contractors whom we hired confirmed that there was evidence of past flooding.
Should the owners have disclosed the problem to us when they accepted our offer to purchase? Is there any legal remedy?
Answer: In many states, the law requires a home owner to disclose problems or unique circumstances within their house when they are in the process of selling. In the District of Columbia, for example, a seller must disclose all known defects. In Maryland and in Virginia, however, a seller has the option of either disclosing all such defects, or disclaiming to disclose. According to the Virginia Code, a seller can provide potential purchasers with:
a residential property disclaimer statement in a form provided by the Real Estate Board stating that the owner makes no representations or warranties as to the condition of the real property or any improvements thereon, and that the purchaser will be receiving the real property "as is," that is, with all defects which may exist, if any, except as otherwise provided in the real estate purchase contract
So the question is: what disclosure form did you receive? Was it a full disclosure of known defects or just a disclaimer? Did you obtain a home inspection, and if so was the water problem discovered by your inspector?
These water-in-the-basement cases are very troublesome. Even if you have a good case, many lawyers just will not want to take on such a matter -- regardless of whether a fee is charged or the case is handled on a contingency fee basis. The reason is that there is a lot of research -- and a lot of proof -- that is needed to win such a case. They are fact intensive -- the burden is on the homeowner to first prove that the seller was aware of the problem. If you can get over this hurdle, the buyer must then demonstrate to the satisfaction of a judge that the seller had a legal duty to disclose these facts.
Finally, the buyer must produce sufficient proof of damages -- which means getting contractors to testify in Court as to the cost of repairs. Many contractors are just not willing to be witnesses in a court battle, regardless of how much they are paid.
You may have a legal remedy, but is it worth the effort? Have you obtained at least two estimates from reliable, licensed home improvement contractors showing what it will cost to fix or correct your water problems?
Litigation is both time consuming and expensive. Many homeowners just decide to cross this off to a bad experience and just pay for the repair costs without litigating. After all, if the corrective work will cost $6,000, you certainly do not want to pay $10,000 (or more) in legal fees in order to get a judgment against your previous sellers.
Keep in mind that our courts follow the American Rule of legal fees: in the absence of a statute (such as a consumer protection law), or a provision in a contract or a lease, each side pays his/her own legal fees. In England, the losing party will generally pay the prevailing party"s lawyers fees.
Your sales contract may contain a provision for legal fees, but there is still no guarantee that you will prevail or that a judge will award you a judgment which includes reimbursement of those fees.
Finally, I often tell people that "there is no cash register at the back of the courthouse." Even should you get a judgment, there is no guarantee that you will be able to collect from your sellers.
The moral of this story is to thoroughly inspect a house before you go to settlement. Include a "home inspection contingency" in your sales contract, and don"t listen to anyone who tells you that you will lose the property if you demand such a contingency.
In your case, you may have a remedy against your sellers, but I am not sure that it is worth pursuing the matter all the way to court. At the very least, once you get an estimate for fixing the matter, you (or your attorney) should send a letter to your sellers. Explain that they mislead you and that you have proof that they were well aware of the flooding problem before they signed your contract. Tell them that you would prefer not to litigate, and ask them to contribute at least half of the repair estimate.
I don"t know what they will do, but it certainly is worth the effort -- and clearly is cheaper than litigation.