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Caveat Emptor and a Buyer’s Duty to Investigate Real Estate Purchase

We blogged about a Charlottesville Circuit Court case in which the court analyzed the duty to disclose for a seller of residential real estate.  We wrote another post regarding that case discussing an exception to the rule of caveat emptor. Specifically, if the seller attempted to “divert” the purchaser’s attention away from problem areas, a court could find fraud and rescind the contract.

However, in Virginia, if a prospective home purchaser discovers information alerting him to a potential problem, that person is charged with knowledge he would have found had he diligently pursued the inquiry. That rule was highlighted in an unpublished opinion released by the Virginia Supreme Court. This blog post reviews the facts of that case and the lessons to learn for real estate sellers and buyers.

In the case of Turner v. Rolly Bay, the Bays purchased a home from the defendants. After moving in, the Bays discovered mold in the home. They alleged in their complaint that the defendants had painted over the mold to conceal the mold and “divert” them from making reasonable inquiry. The  circuit court judge found for the Bays and ordered “rescission” of the contract and restitution.

The Virginia Supreme Court reversed the decision and found for the selling defendants, determining that the doctrine of caveat emptor barred the Bays from recovering. In this case, even though the selling defendants had painted over the mold, during the home inspection:

the Bays’ home inspector found standing water and a mold line in the house’s crawlspace and notified the Bays of his discoveries. Moreover, the home inspector told the Bays that he could not finish his inspection until the standing water was remedied and instructed them to call him when that had been completed.

Consequently, once they had these facts, by the doctrine of caveat emptor, the Bays were “charged with all the knowledge which [they] might have obtained had [they] pursued the inquiry diligently to the end.” Their failure to diligently pursue that inquiry left the Bays with no relief.

The lesson to be learned is that purchasers of real estate have a difficult burden to overcome the doctrine of caveat emptor so do your homework. If a potential purchaser discovers potential problems during an inspection of the property, the doctrine of caveat emptor requires the purchaser to diligently pursue that inquiry, even if the seller took diverting actions. On the other hand, the doctrine of caveat emptor requires the prospective purchaser to exercise “ordinary care” when inspecting the condition of property he intends to purchase, so failing to inspect the property is not an alternative. When in doubt, contact an experienced real estate attorney to help you determine your options.

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

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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