Real Estate Lawsuit Against Seller – blog post by Philadelphia lawyer

Harper Dimmerman handles real estate law and litigation; his office is located in Philadelphia, Pennsylvania.

A Chester County court just recently sided with a homeowner who sued the prior owner after discovering problems with the house.  Plaintiff brought claims against the previous owner after encountering various flaws in the home. As a result of water damage and leaking, the Plaintiff paid more than $16,000 for repairs. The Plaintiff argued that the seller breached an implied warranty of habitability, breached contract, violated the Unfair Trade Practice and Consumer Protection Law and failed to disclose water leakage problems on the sellers’ disclosure statement. The Court concludes that the implied warranty of habitability had been breached. An implied warranty of habitability is created when a contract to build or sell residential construction is executed. The agreement of sale stated that the property was being sold “in as-is condition” and “without warranty.” However, the agreement did not contain language that was particular enough to waive the implied warranty of habitability.

Real Estate Law Article, co-authored by a Philadelphia Lawyer

Real Estate Law Article, co-authored by a Philadelphia Lawyer, Harper J. Dimmerman, Esquire

Real Estate Law, Philadelphia, PA, Article Published by “The Legal Intelligencer”, “A Mysterious Case: Pennsylvania’s Seller Disclosure Law”

COPYRIGHT. 2013. ALM. ALL RIGHTS RESERVED. UNAUTHORIZED REPRODUCTION IS PROHIBITED. 

“Truth will come to light: murder cannot be hid long.” Shakespeare, Merchant of Venice, Act I, Scene II. Disclosing or even defining defects at a property prior to transfer, as banal a task as this may seem, can raise a whole host of complex questions. Fortunately however, in the Commonwealth of Pennsylvania, at least for those queries less concerned with one’s moral or philosophical bent, the legislature has supplied all of the attentive homeowners amongst us, a pretty decent guidepost. Naturally we are referring to the Real Estate Seller Disclosure Law, codified at 68 Pa.C.S.A. section 7102. And customarily, the parties to a residential deal typically have the benefit of their respective agents, who through a series of key forms can vastly simplify the information exchange process. At least for the purpose of this article, the crucial document upon which the buyers rely in formulating an offer is the Seller’s Disclosure. And the Realtors Association has done a commendable job of encapsulating the spirit of the Disclosure Law in a relatively detailed form, to be completed by sellers in a majority of residential transactions.[1] Unquestionably, the prevalence of the PAR Disclosure Form streamlines the disclosure process significantly.

Nonetheless, without the benefit of competent counsel, opting to disclose or not disclose a particular issue with a property, especially in light of the subjective nature of what constitutes a material defect, can become risky business, even with the best of intentions and seeming adherence to the Law. A recent decision, handed down by our Superior Court just before the New Year, is illustrative of the complexities to which we refer and the oftentimes nebulous aspects of Pennsylvania’s Disclosure Law. The facts in the Milliken v. Jacono, et al. matter (2012 PA Super 284, No. 2731 EDA 2010) are straightforward enough. Here, the plaintiff purchased a home from a husband and wife. The property, located in Delaware County, possessed somewhat of a checkered past though. As fate would have it, the sellers’ had acquired the property from an estate, as noted in the title documents. Apparently, the estate came to own the property due to a murder-suicide that had occurred at the property, a tragic event that in fact was divulged to the listing agent by the sellers in anticipation of transferring the home. The sellers, even prior to listing the property, independently researched the issue of the need to disclose the murder to prospective purchaser. They went so far as to obtain and memorialize in writing conversations with representatives of the Real Estate Commission, amongst other things. The listing agents, rather wisely, engaged in their own due diligence, pursuing definitive guidance on the question of whether such a mark constituted a material defect. Understandably, they were eager to properly advise their sellers regarding whether they had a duty to disclose such an occurrence. Ultimately, the agents permitted their clients to employ a Disclosure that omitted what some might suggest is a vital piece of information related to the subject property.

Subsequent to settlement, the purchaser plaintiff discovered that her new home had indeed once been the site of a grisly scene. Litigation was commenced, sounding in negligence and fraud, the buyer going so far as to name the listing agents who had gone to fairly great lengths to avoid the very predicament in which they now found themselves. Eventually summary judgment was granted, with the instant appeal ensuing. The gravamen of plaintiff’s argument was that a psychological condition, such as the one plaguing the home, is one that rises to the level of a material defect and hence necessitates disclosure. Bear in mind that a “material defect” has been defined in the following manner: “A problem with a residential real property or any portion of it that would have a significant adverse impact on the value of the property or that involves an unreasonable risk to people on the property. The fact that a structural element, system or subsystem is near, at or beyond the end of the normal useful life of such a structural element, system or subsystem is not by itself a material defect.”

Plaintiff was constrained to look to other jurisdictions for precedent, particularly a California and Ohio decision, Reed v. King, 145 Cal. App. 3d 261, 193 Cal. Rptr. 130 (Cal. Ct. App. 1983), and Van Camp v. Bradford, 623 N.E.2d 731 (Ohio Ct. of Common Pleas 1993), respectively, which relies directly on ReedReed involved the sale of a house in which a woman and her four children had been murdered 10 years prior to the conveyance. Van Camp raised the question of a disclosure requirement of a rape at the property within one year of the transfer, where various other rapes had been committed in that neighborhood. Both the Reed and Van Camp courts concluded that actionable fraud did exist, which might have been sufficient for the Milliken court.After all, the plaintiff here also substantiated her claims with concrete economic harm, namely two experts who opined that there had been a reduction in value, nearly $100,000.00, not an insignificant sum by any stretch.

The majority of our Superior Court, honed in on the legislative intent behind the Disclosure Law and the slippery slope associated with permitting a psychological stigma to become actionable. For instance, “ . . . how recent must the murder be that the seller must inform the buyer?” Or “[w]hat if numerous owners have lived in the house in the interim?” “[I]s this disclosure limited to murder, or must other crimes be revealed also?” At the end of the day, the Milliken court hesitated to condone what would become “. . . a massive expansion in the character of disclosure,” mainly requiring sellers to consider not only physical defects but also psychological ones. Notably however, in a highly well-reasoned Dissent penned by Justice Bender, a more ambitious view of the breadth of disclosures was encouraged. Justice Bender, in addition to scrutinizing the Disclosure Law, also discusses the relevance of the Residential Real Estate Transfers Law, 68 Pa.C.S. sections 7101-7103, which in the Justice’s words “. . . provides meaning and context for the [Seller Disclosure Law].” He takes issue with the Majority’s position that defects are limited to structure, legal impairments or hazardous substances and concludes that the Transfer Law necessarily informs the Disclosure Law and provides the appropriate benchmark for defining a “material defect.” Even section 7313 of the Seller Disclosure Law concedes that the form promulgated by the Real Estate Commission does not abridge any disclosure obligation created by any other provision of law. In his estimation, these particular facts warrant a trial at the very minimum. Whether Pennsylvania courts eventually adopt a more expansive interpretation of what constitutes a “material defect,” one truth seems evident, merely by virtue of the existence of this litigation. The benefit of being legally correct does not always outweigh the benefit of staying outside the courtroom.

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Harper J. Dimmerman is an attorney and adjunct professor at Temple University’s Fox School of Business. Bradley J. Osborne was formerly an attorney in Mr. Dimmerman’s office.

James M. Lammendola is an Instructor at Temple University’s Fox School of Business who was in private practice for twenty years.

[1] Certain transactions, such as estate sales and intrafamilial conveyances are exempt.