Non-Disclosure Prosecution and Defense: Every day, sellers and buyers engaged in contract negotiations. The seller offers to sell the property for a certain price, and the buyer offers to pay that price. However, the transaction is often contingent on certain warranties, repairs, and so on. Specifically, the seller has an obligation to disclose anything that may reasonably impact the compensation to be paid by the buyer. If the buyer fails to list problems that it knows about, then it can be sued for this non-disclosure. Similarly, if the real estate agent has a red flag, and fails to investigate the same, then it may be sued for failing to disclose information that it knows or should know about.
Department of Real Estate complaints: A.R.S. 32-2153 and A.A.C. R. 4-28-1101 generally provide the professional duties of agents. However, these duties are sometimes easier in principal than in application. In many instances, the agent may find itself in hot water for misrepresenting the terms of the transaction, for not disclosing a septic system, and so on. If you are confronted with a department of real estate complaint, please call the firm immediately as we are very familiar with real estate law in Arizona.
Quiet Title and Slander of Title Complaints: In Arizona real estate law, quiet title lawsuits are governed by A.R.S. 12-1102 and 1103. A.R.S. 12-1102 explains the specific parameters for the complaint. Moreover, A.R.S. 12-1103 provides the specific parameters for obtaining attorney’s fees for a quiet title action.
Moreover, if the owner files a lien or clouds title when it knows that it does not have an interest in the title, then the owner may file a lawsuit for slander of title. However, slander of title suits are difficult, because these claims generally require a showing of malice on the part of the party that is clouding the title. Often if there is a contest about whether the property should be sold, it may also end up being partitioned, which is a process to force the sale of the property.
REALTORs must help their clients disclose any latent defects before selling any property. In Arizona, this is commonly done through a Seller’s Property Disclosure Statement (SPDS). If the REALTOR and its client fail to disclose material defects, then the REALTOR may lose its commission and its license. Of course, common examples of material non-disclosures include the failure to disclose 1) floods, 2) fires, 3) leaks, 4) lawsuits, 5) mold, and so on. If the seller fails to disclose such defects, then the buyer may sue the REALTOR and its client for damages that naturally stem from the non-disclosure.
The leading case on point is S Development Co v. Pima Capital Management Co., 201 Ariz. 10, 31 P.3d 123 (App. 2001), which held that the seller has a duty to disclose latent defects in the property, even if the property is sold “As Is”.
In determining the damages for the wrongful non-disclosure, the trial court approved the following jury instruction
If you find that any of the defendants are liable to plaintiffs for negligent misrepresentation by omission or fraud, you must then decide the full amount of money that will reasonably and fairly compensate plaintiffs for damages proved by the evidence to compensate the plaintiffs for the pecuniary loss to them of which the misrepresentation is a legal cause, including the difference between the value of what was received in the transaction and the purchase price or other value given for it, and pecuniary loss suffered otherwise as a consequence of the plaintiff’s reliance upon the misrepresentations.
Thus, the Buyer could potentially recover the following damages in a non-disclosure case:
– Rescission of the Contract: The Buyer may decide to unwind the contract. In addition, the buyer may seek to recover any out-of-pocket expenses and attorneys fees that he might have incurred as a result of REALTORs and the sellers’ breach of contract and negligent misrepresentation; or
– Cost of Repair: The buyer, if he elects to stay in the property, may elect to have the Defendants pay to fix the defects in the property and any other incidental expenses, including holding costs, that they may incur.
The lesson is this: the REALTOR and the seller must take great care before selling any piece of real estate. We do not live in a “buyer beware” society. So, seller beware.
For more information about what damages are recoverable in a non-disclosure lawsuit, contact the experienced Arizona Real Estate Attorneys at Degnan Law immediately.