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Homebuyers Options for Resolving Home Defects After Closing

Founding Member of Moshes Law, P.C.
During his years of practice, Yuriy has concentrated in litigation and real estate transactions as his areas of expertise.

Purchasing a home can be a long and stressful process, especially when purchasing an older home from a prior owner.

This is both due to the complexity of the home sale process and the possibility of discovering home defects after purchase.

Most houses will have minor items that need to be either fixed or replaced here and there. In many cases, a buyer will buy a home knowing that there will be problems with the house after closing.

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In other cases, however, a seller’s failure to disclose property defects can leave homebuyers frustrated by serious home defects.

Depending on several factors, including the seriousness of any home defects after purchase, homebuyers may have several options available to them.

What is Caveat Emptor and How Can Homeowners Avoid it?

Caveat emptor is a famous legal phrase that translates to: “let the buyer beware.”

The legal rule of caveat emptor basically means that once you buy the home, whatever you paid for is what you got, and buyers have a limited ability to sue the seller for any defects discovered.

As a result of caveat emptor in New York, a homebuyer is generally obligated to inspect a home for any defects before purchase.

The buyer cannot rescind the real estate contract after closing if the defects could have been discovered in an inspection.

Unless the seller intentionally tried to conceal a defect, for example, by lying or hiding it, buyers often cannot get relief.

Caveat emptor is limited where the homebuyer is purchasing directly from a builder. This is because builder-sold homes come under a special legal warranty called the warranty of fitness.

If the home is not fit to live in when the builder sold it, the buyer can sue the builder. However, it is never a good idea to rely on this warranty, and new homebuyers should always have the home inspected before closing.

suing home seller misrepresentation

What Are the Laws on Misrepresentation and Real Estate Failure to Disclose?

As explained, many homebuyers do not have good options under New York real estate law if you discover defects after closing.

Because repairing a roof or fixing defective plumbing is often expensive, it is important to understand the possible legal remedies available to you. In certain circumstances, you may be entitled to sue the seller for compensation for the repairs.

What Is Failure to Disclose in Real Estate Law?

New York law requires that the seller provides the buyer a disclosure statement before the purchase contract is signed. This disclosure statement is then attached to the contract itself and then incorporated into it.

If the seller provides a disclosure and does not mention a known defect, the seller may be liable to the buyer for damages if the defect is material.

If material defects are not disclosed in writing, then the buyer can sue under New York law.

A common exception to this rule, however, are home features expected to fail with age. For example, water heaters are designed to be replaced roughly every ten to twenty years.

If you purchase a home with a fifteen year old water heater, you cannot generally sue the seller for a replacement water heater because you should have expected it to break.

How Can I Sue the Seller for Non-Disclosure?

Home sellers are liable for undisclosed problems under three different situations.

First, a seller could become liable because of a lie that the seller told regarding a possible defect. Such a situation is commonly referred to as fraud.

Second, a seller could become liable because of a misleading omission about a possible defect.

This situation is commonly referred to as a misrepresentation.

Third, the seller could become liable because the seller failed to follow through with the terms of the contract. This is known as a breach of contract.

Fraud involves a false statement of a material fact by the seller that is reasonably relied upon by the buyer.home defects after purchase

In other words, if the seller’s home has termites and the seller lies to the buyer and tells him, “there are no termites,” then the seller may have committed fraud.

To prove fraud, the buyer must demonstrate that the seller knew the statement was false and that the buyer told the lie to encourage the buyer to purchase the home.

This commonly happens where the seller attempts to actively conceal a defect. For example, if a home seller knows that there is a terrible pet odor, but the home seller masks the odor with extreme overuse of air freshener, then the seller may have committed fraud.

Additionally, the buyer’s reliance on the misstatement must have been reasonable. In other words, if the seller told a lie that was completely unbelievable, then the buyer cannot sue for fraud.

Misrepresentation by omission is similar to fraud in that it involves the seller making a true statement about the property that is misleading because it leaves out very important information.

A famous example of this type of misrepresentation by omission involves fire proofing. In one case, the buyer of a building was reassured by the seller that the drywall product used had been tested for fire safety.

The seller was telling the truth that the drywall had been tested for fire safety, but conveniently left out the fact that the drywall had failed all of its fire safety tests.

The deciding court found that the buyer could recover for this misleading omission because it created a circumstance very similar to fraud.

Finally, a breach of the sale contract could allow the seller to be sued under certain circumstances. This most commonly occurs where the contract contains either a warranty or a guaranty that is breached.

A breach of contract can also occur where the seller and the buyer agree to certain contract terms that are violated by the seller.

An example of this circumstance is a contract in which the seller agrees to leave behind all of the homes “fixtures” (including appliances like washer/dryer and stove tops as well as fixed lighting appliances).

If the seller agrees to leave all of the fixtures, but instead removes an expensive chandelier, then the seller has breached the contract and the buyer can sue.

To prove fraud, the buyer must demonstrate that the seller knew the statement was false and that the buyer told the lie to encourage the buyer to purchase the home.

What Is a Material Defect in Real Estate?

How serious must a real estate failure to disclose be for a homebuyer to sue? The answer is that it depends on whether the defect was “material” to the real estate sale.

According to a definition provided by the International Association of Certified Home Inspectors, a material defect is an issue with a system or component of a residential property that results in a significantly adverse effect on the value of the property or that poses a safety risk.

See International Association of Certified Home Inspectors.  In other words, a home defect is material if it either makes the home unsafe or if it substantially reduces the property value. There are many different types of material defects:

Construction Deficiencies: Defects in construction are commonly considered material because they make the home unlivable or unsafe.

Commonly, cracks in walls, poorly laid foundations, electrical or mechanical problems, and plumbing issues are considered construction defects.

Materials Deficiencies: The use of inferior building materials in either the home construction or in an addition to an older home can result in significant problems and are often difficult to discover without an inspection.

The most common types of manufacture issues with materials are in waterproofing, asphalt, inferior drywall products, and cement mixing.

Design Deficiencies: A design defect occurs where the home is not built according to the building code.

What is material defect in real estate

Design defects most commonly occur in the purchase of new homes, as most owners of older homes that had building design defects are required to repair them by law.

Typically, the most common design defects are water intrusion through the roof, walls, or windows, and poor water drainage systems.

Subsurface Deficiencies: Subsurface deficiencies are rare, but they occur where a home is built on bad soil and the foundation could not be properly secured, no matter how well the home was built.

Landslides and sinkholes, which are not particularly common in New York, can also cause subsurface defects.

Maintenance Deficiencies: In older homes, improper homeowner maintenance can result in material home defects. The most common example is a termite infestation.

Homebuyers who found mold in the house after purchase or who discover rotted wood or decayed foundations may also have maintenance defects.

Contractual Deficiencies: Finally, a defect can be considered material if the parties explicitly negotiated it in the contract and the homebuyer only signed the contract on the condition that the seller would do something.

For example, if the homebuyer and the seller agreed that the roof was in disrepair and the seller agreed in the contract to repair the roof prior to closing, then the seller’s failure to repair the roof constitutes a material defect.

What Is the Property Condition Disclosure Act?

The Property Condition Disclosure Act (“PCDA”) is a New York Law that requires sellers of all residential property to provide a disclosure statement to buyers detailing all known defects relating to the property of pay a credit of $500 to the buyer at closing.

Sellers must complete the disclosure form and deliver it to the buyer prior to the buyer’s signing of the contract.

The PCDA applies to all residential properties containing up to four dwelling units, which means the PCDA includes standard single-family homes, duplexes, and some multi-family homes.

The PCDA does not generally apply to condominiums and cooperatives. The PCDA merely requires disclosure of defects and does not necessarily create a cause of action allowing a home buyer to sue for defects. However, a seller’s false statement on a PCDA could provide evidence of a fraud or a misrepresentation.

Can a Real Estate Broker Be Liable for Property Defects?

Like the home seller, the real estate broker can be liable for non-disclosure, fraud, or misrepresentation.

When selecting a person to sue, consider who was responsible for the misrepresentation or false statement. If the real estate broker lied, the buyer may sue the real estate broker; however, if the seller lied, the real estate broker is not liable.

The real estate broker can be held liable for negligence in certain cases where the broker turns a blind eye to the seller’s false or misleading statements.

Note, however, that the real estate broker generally cannot be sued by the buyer for breach of contract because the real estate broker is not a party to the contract. The PCDA also applies to real estate brokers.

When selecting a person to sue, consider who was responsible for the misrepresentation or false statement.

Can a Home Inspector Be Liable for not Finding the Defect?

In most cases, home inspectors will not be liable for failing to notice home defects because most standard home inspection contracts limit the inspector’s liability.

When selecting an inspector, homebuyers should have their attorneys review the inspection contract to determine whether the liability-limitation terms are acceptable.

Regardless of the contract terms, however, an inspector can be liable under certain extreme circumstances.

For example, if the inspector did not actually inspect the home or conducted the inspection in an extremely inappropriate manner (possibly while drunk or under the influence of narcotics), then the inspector could be liable for either fraud, breach of contract, or gross negligence.

What to Do if You Bought a House with Problems Not Disclosed?

As in any civil court proceeding, the burden of proving that fraud, misrepresentation, or breach of contract occurred rests solely with the claimant.

This means that you have to have evidence to back up your case. Hiring an inspector helps because you will at least have the inspection record to back up your claim.

If you have discovered problems with your house after closing, you must act quickly because the seller’s liability is limited by time. Under New York Law, a law known as the statute of limitations sets a strict deadline within which you must file your claim in court.

That deadline is generally six years for breach of contract and fraud claims.

If you plan to file a lawsuit, you should immediately begin to protect your rights by taking the following steps:

  • Examine your purchase contract with the assistance of an attorney to determine how limited your ability to recover may be. Certain contract clauses such as merger provisions, claims limitations, or “as is” clauses can limit your ability to sue. In other cases, warranties clauses may expand your rights as an aggrieved party.
  • Review your inspection to determine whether the inspector noted the possibility of the defect. Often, home inspectors will make notes about items that may require future repair or look potentially unstable.
  • Investigate similar occurrences of the problem in the surrounding neighborhood. This can be especially helpful if you live in an area where all of the homes were built roughly around the same time period. It also helps if your neighbors live in homes constructed by the same builder. Generally, large problems occur in similar homes at roughly equal times.
  • If you have identified a person you believe may be responsible, hire an attorney to write a demand letter to the responsible party. In the demand letter, you should describe the defect, the basis of the other party’s liability, and ask for some remedy (usually a specific dollar amount, or a request for repair).

If the buyer is persistent enough, the seller may agree to settle only and compensate the buyer for his or her trouble.

Hiring an attorney will put the seller on notice that you are serious about pursuing a claim, and it can help you get the relief you need.

If the seller refuses to respond to your communications or if the seller does not agree to a settlement, you could go to court.

If you have not yet hired an attorney at this stage, now is the time to do so. It is very difficult for an unrepresented party to successfully file this type of lawsuit without assistance.

What should a buyer do before closing?

In general, you will want to both examine the property yourself and hire an expert home inspector to review the home for any defects that you would not know to look for or might miss.

Keep in mind, however, that a home inspection is not necessarily going to uncover all problems with a home. As a general rule, home inspectors look for physical defects in the home, and are not specifically looking for high levels of radon or non-termite pests (like roaches or rats).

However, even radon levels and pests can be inspected with an experienced inspection company.

Generally, an inspector will note any issues that they spot, but for older homes, it may be worthwhile to discuss inspecting for other non-physical problems with the home just be be on the safe side.

These are the most important areas to examine:

  • The roof;
  • The home’s foundation;
  • Mechanical and electrical systems in the home;
  • Common areas of water intrusion (window panes, roof, cracks under doors, etc);
  • Thermal insulation and moisture protection;
  • Doors, windows, and glass; and
  • Finishes on the paint and walls.

Additionally, at closing, you need to make sure that you leave with certain documents.

In the event of an issue after closing, the closing documents will determine what types of legal claims the buyer has access to.

Additionally, violations of state disclosure laws can be easier to prove if you have documents showing that a seller lied about an issue with the home.

Always make sure that you have the following documents after closing:

  • Seller’s disclosure form;
  • Home inspection report;
  • Title report;
  • Property survey; and
  • The home sale contract and all of its parts.

Proving that a defect exists in the home and asking for a settlement amount may be a very long and complicated process.

You should have an experienced real estate attorney by your side to ensure that you get the compensation that you are entitled to.

The Law Office of Yuriy Moshes help represent clients in real estate deals and home closings in the greater New York City area including all its boroughs (Manhattan, Brooklyn, Queens, the Bronx, and Staten Island) as well as Northern New Jersey, Long Island, and upstate New York.

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