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The Rule of Caveat Emptor in the Sale of Real Estate vs. a Seller’s Duty to Disclose

Simply stated, caveat emptor means “let the buyer take care,” or even more plainly stated: “Buyer beware.” In real estate matters, buyers are warned that they are to “exercise ordinary care in inspecting the condition of property.” Therefore, buyers are generally urged to obtain a home inspection and take such other care prior to closing on their real estate purchase. Otherwise, the buyers may not have any relief if they find adverse conditions after taking possession.

A case arising out of Charlottesville highlights the obligations of the buyers and the sellers in the purchase of a home. In that case, the seller of the home was also a licensed real estate agent, which added another complication regarding the duty to disclose. This blog posts analyzes that court decision, which offers warnings to buyers and sellers of real estate, as well as to licensed real estate agents.

 

 

FACTS

In Walton v. Aguiliar, the Complaint alleged that the buyers signed a contract for the purchase of the sellers’ property, a townhome. The defendant, a part owner of the property, was also a “licensed real estate agent.”

Six months after purchasing the property a rain storm hit Charlottesville. Water entered the residence and eventually rose to height of THIRTY-TWO INCHES! Investigation showed that a clogged drain on an adjacent property caused the flooding. Further investigation showed that the same clogged drain had caused flooding three times prior to the buyers’ purchase of the property. Additionally, the buyers found out that the seller had been informed of the prior flooding by the listing agent who sold the property to the seller. The sellers had a home inspection, but the seller did not tell the buyers about the flooding.

The buyers sued the seller on three counts: 1) Breach of Duty by the seller, a real estate agent, to disclose material adverse facts; 2) Fraudulent Misrepresentation; and 3) Constructive Fraud. We will discuss the Breach of Duty in this blog post, and in a later post, we will discuss the Court’s decision on the Motion to Dismiss the fraudulent misrepresentation and constructive fraud counts.

THE COURT’S DECISION ON THE SELLER’S DUTY TO DISCLOSE

The court noted that a seller/real estate agent has a statutory duty to “disclose in writing all material adverse facts pertaining to the physical condition of a property for sale.” Even though the clogged drain was on the adjacent property, the property for sale had been subject to periodic flooding. Because the court found that the seller/real estate agent knew of the periodic flooding, and because an agent has a duty to disclose that fact, the Court held that the buyers properly pleaded that the seller breached a statutory duty to disclose material adverse facts. The Court permitted that claim to go forward.

What to disclose and what not to disclose in the sale of real property can be a difficult balancing act. In this case, at least at the pleading stage, the difference was that the seller was also a licensed real estate agent. If in doubt, seek legal counsel from your experienced real estate lawyer.


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Tarley Robinson, PLC,  Williamsburg, VA – Attorneys and Counsellors at Law

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John Tarley

John is the firm's managing partner and chairs the firm's small business, zoning, and litigation practice areas.

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Filed under: Construction litigation, John Tarley, Real Estate Litigation, Real Estate Strategies, State & Federal Litigation by John Tarley

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