Is That Flip A Flop?
Understanding Homebuyer Rights
The ongoing growth of long-established Pittsburgh neighborhoods has brought with it new building construction, but also efforts to renovate-for-sale existing homes. The booming retail market has caught the attention of national redevelopers, as evidenced by recent radio ads for seminars put on by the folks from A&E’s Flip This House. All of this has led us to think about the other side of the coin, that is, the rights of those purchasing these homes.
Originally, the law put home buyers in the same shoes as the seller, that is, the rule for purchasing a home was caveat emptor or buyer beware! The law assumed that buyers knew as much about the property as the sellers, and had equivalent bargaining power - a presumption that was plainly misguided. That legal presumption changed with a Supreme Court case that was decided in 1972 and then later, the enactment of the Real Estate Seller’s Disclosure Law (“RESDL”) in 2000.
Instead of assuming that the buyer knows as much about the house as the seller, the RESDL mandates that seller share information that they know about the house with the buyer. Specifically, the law requires sellers to prepare a disclosure statement that reveals what the seller knows about a variety of topics, ranging from the basement, sewage, water, plumbing, and a host of other topics.
Importantly, the seller must disclose any “material defects,” which the law defines as any problem that would have a significant affect on property value or that involves an unreasonable risk to persons on the property. If the seller fails to reveal a material defect or makes a false or misleading statement in the disclosure document, then the seller will be liable to the buyer for damages to correct the defect.
In abandoning the doctrine of caveat emptor, the RESDL changed how the law looks at the “silent seller.” Previously, if the seller made no mention of a material defect, the buyer had to prove that the seller’s silence was fraudulent, or in other words, that the seller’s silence was intended to mislead the buyer about the condition of the home. As you can imagine, it could be difficult to prove that a person’s silence was specifically designed to mislead another person about a particular problem with the house.
The RESDL changed this equation by making the seller affirmatively reveal any defects about which they knew or should have known. If the disclosure statement fails to reveal the defect and the buyer proves that the seller knew or should have known about the defect, then the seller will be liable to the buyer regardless of whether the seller intended to mislead the buyer by remaining silent.
Another legal rule that protects home buyers is known as the Implied Warranty of Good Workmanship or Construction and Habitability. This rule was adopted by Pennsylvania’s Supreme Court in 1972. It is not a statute, but instead is a rule adopted by the courts (typically referred to as “common law”) that provides, quite simply, that a builder-vendor warrants that the home being sold was constructed in a workmanlike manner and is fit for the purpose for which it was intended, that is, habitation.
The reasoning behind the rule is that the purchaser justifiably relies on the skill of the developer, who necessarily holds himself out as having the necessary expertise with which to produce an adequate dwelling. The rule is rooted in the existence of a contract - an agreement of sale - between the builder-vendor and purchaser-resident, which leads to an important limitation about this rule: unlike the RESDL, the Implied Warranty of Good Workmanship does not apply to subsequent sales of the house. The rule arises solely out of the contract between the builder-vendor and buyer-resident and is limited to that transaction.
A third law worth mentioning is the Unfair Trade Practices and Consumer Protection Law (“UTPCPL”). The purpose of UTPCPL is to protect the public from fraud and unfair or deceptive business practices. The law applies to any purchase of goods, which includes real estate, and provides that a person may bring suit to recover damages caused by another’s fraudulent conduct. Two aspects particular to the UTPCPL warrant mention.
First, because its intent is broadly to protect the consuming public, courts have been given the authority to award treble damages (tripling the amount of actual damages) based on a violation of the law. Second, courts have been authorized to make the fraudulent violator pay for costs and attorney fees incurred by the successful plaintiff. As one can imagine, the prospect of paying triple damages and the other side’s attorney fees can, under certain circumstances, provide a significant incentive for the parties to work towards a settlement in order to avoid litigation.
If you are in the process of purchasing a home, inspect your home carefully and hire a professional home inspector as well. Compare your observations to the representations in the disclosure statement. Did you see any evidence of basement leaks, or window or roof leaks? Was there evidence of recent repairs? How does that compare to what the seller represents in the disclosure statement?
Inquire about any past problems and how they were repaired. If there were major problems that the seller has corrected, you may want to request that those representations be made a part of the disclosure statement where they cannot be misrepresented. If you recently purchased a home and are concerned about what may be a material defect that was not revealed, feel free to give us a call to discuss the matter and get an assessment of your legal options.
DISCLAIMER: This blog is meant for informational purposes only and does not constitute specific legal advice or create an attorney-client relationship. Readers should discuss their specific situation with an attorney.