Follow Up to, When a Seller’s Disclosure Statement is Not Truthful

Follow up to our recent – and very popular – newsletter regarding Seller’s Disclosure Statements

Our recent newsletter entitled, “When A Seller’s Disclosure Statement Is Not Truthful”, garnered a lot of attention.  In fact, it led to several in-person presentations to local realtor groups on this critical topic.  In light of that, we thought you would find more “discussion” helpful.

 (a) Representations in MLS Listing

Williams v. Chase Home Finance LLC:  Plaintiffs commenced this action in connection with their purchase of a home from defendants Chase Home Financial, LaSalle Bank National Association, and EMO Mortgage Corp. Sellers were aided in the sale of the foreclosed property by realtors NJ REO Asset Management & Realty, Inc. and Ralph Barone, also joined as defendants. Plaintiffs allege the property’s Multiple Listing Service (MLS) listing, specifically its water sewer description, constituted an affirmative misrepresentation in violation of the New Jersey Consumer Fraud Act (CFA).  Plaintiffs claimed that in September 2009, after reviewing the listing and assuming the water sewer description meant the property had “started out on [a] septic system” but had later been connected to “the public sewer”, they purchased the home for $75,000 without conducting a title search or obtaining any inspections of the property.  The contract and incorporated addenda confirmed that the property was being sold as is.  After taking title, plaintiffs discovered that the property was not linked to the public sewer system and its septic tank was defunct.  The court observed that, despite listing description’s ambiguity, plaintiffs’ claim ignores the listing’s unambiguous disclaimer, which declared the “[i]nformation reliable but not guaranteed.” Because nothing in the listing or contract of sale could be viewed as a false representation, the appellate panel affirmed the dismissal of plaintiffs’ claims.

Chalk one up for the good guys (and gals)!

(b) Is the attorney an agent for the Seller/Buyer?

Zennario v. Ragulin: a Seller filed a lawsuit against defendant buyers alleging breach of contract and seeking compensatory damages based on the purchase price ($230,000) of the property set forth in the parties’ contract less the sale price ($190,000) later obtained, together with the additional costs ($12,831.44) incurred by seller in maintaining the property in the interim.  Buyers filed a counterclaim, alleging breach of contract, fraud in the inducement, and misrepresentation.  Buyers moved for dismissal, asserting seller’s failure to respond to their earlier small claims complaint seeking the return of their deposit barred seller’s assertion of the claims in this action.  Seller was not named as a party to the small claims lawsuit, which resulted in buyers obtaining a default judgment against the listed real estate agent.  The judge denied buyer’s motion to dismiss, and at the conclusion of a bench trial, found in seller’s favor, awarding $52,831.44 in damages.  The judge found buyers’ testimony that their attorney was not authorized to make his response pertaining to a flood zone issue during attorney review was not credible, and that a binding contract was validly formed during attorney review.  The appellate panel rejected buyers’ arguments that: (1) there was no meeting of the minds regarding the property’s location in a flood zone; (2) plaintiff breached the implied covenant of good faith and fair dealing; (3) there was a mutual mistake of fact; (4) the contract did not survive the attorney review period; and (5) the action is barred by the entire controversy doctrine.

This ruling has application to you, particularly due to our “South Jersey” way of doing things.  In such a setting you have constant involvement in communications of legal significance, and, thus, the agency issue may be paramount in future disagreements about who said what and when, and, importantly, whether you were authorized to do so.  20/20 hindsight can be a slippery slope.  Document your files.  Save (and print) your emails.  Do not rely on your memory.

(c) Did you know?

Did you know that the standard disclosure statement includes the below language in your acknowledgment?

The Seller’s real estate broker/broker-salesperson/salesperson also confirms that he or she visually inspected the property with reasonable diligence to ascertain the accuracy of the information disclosed by the seller, prior to providing a copy of the property disclosure statement to the buyer.

It’s known as the safe harbour provision of New Jersey’s Consumer Fraud Act.  If you have a question about it, email me at [email protected].  In case you missed it, read the original article here: “When a Seller’s Disclosure Statement Is Not Truthful”.