Samantha and Ryan purchased a home in Spring Lake, Michigan, that had serious flooding and mold issues. They bought the property from Joann, who purchased the home for her granddaughter Lisa, and her husband, Michael. As part of the sale, Joann filled out a seller’s disclosure statement by drawing a line through the disclosure and indicating “Seller has never lived at property.” Samantha and Ryan’s realtor asked if the seller could complete the disclosure to the best of his or her ability because “they must know some information on age of roof, etc.” Joann’s realtor responded, “we are unsure of age of the roof, we made some repairs last year to it. It will probably need a new one shortly.” Ryan’s dad then inspected the house, but he didn’t observe any water or mold issues.
Within months, flooding occurred (nearly a foot of water in the living room). Ryan spoke to the neighbors and they said the property was known to flood and Lisa and Michael had troubles with flooding. Ryan also spoke to the prior owner, who said he had continual problems with flooding. Samantha and Ryan then sued Joann, Lisa, and Michael for various forms of fraud and breach of contract. The trial court dismissed the case. The court found that Joann’s statement that she “never lived at property” was not fraudulent and Samantha and Ryan provided no proof that Joann knew about the property’s conditions. The court also found that Lisa and Michael didn’t have a legal duty to disclose conditions on the property. Samantha and Ryan appealed, but lost again.
So what can potential buyers do to possibly avoid a situation like this?
1. Ask the hard questions. If you’re concerned about mold, flooding, roof leaks, or other serious issues, ask the sellers, and document the Q&A’s in writing. The court in Samantha and Ryan’s case observed that a duty to disclose may arise if buyers express a particularized concern or directly inquire of the seller.
2. Don’t sign or accept an unsigned disclosure. If a seller leaves any question blank or fails to sign the form, insist on a completed disclosure.
3. Do an inspection. The best way to know what you’re buying is to inspect the property thoroughly, and do your homework when selecting an inspector. But inspectors may not catch everything, which is why it’s important to ask the hard questions.
4. Talk to the neighbors (half-kidding). While I wouldn't have the courage to do it, it could be effective.
For more information on Samantha and Ryan’s case, see Celano v Hofstra, unpublished per curiam of the Michigan Court of Appeals, Docket 334279; 2017 WL 4158127 (Sept. 19. 2017).
The above is not intended to be a complete or exhaustive summary of Michigan’s Seller Disclosure Act or related Michigan law. Moreover, the appropriate or best strategy of a home purchase, or litigation concerning a home purchase, will depend on the facts of each case. Therefore, readers should not act upon this information without seeking professional counsel.