Troubleshooting Real Estate Transaction Problems Seminar in Philadelphia, PA

Troubleshooting Real Estate Transaction Problems Seminar in Philadelphia, PA on March 2, 2015

Harper J. Dimmerman, Attorney at Law, focuses his law practice of real estate law. He handles both litigation and transactional matters: (215) 545-0600. If you need an attorney for settlement, negotiation, For Sale by Owner (FSBO) transactions or litigation (mechanics’ liens, confession of judgment, partition, trespass, landlord tenant, foreclosure defense, ejectment, quiet title, breach of contract, contract litigation, seller disclosure fraud, home inspection cases, realtor negligence cases, amongst others).

Mr. Dimmerman will be lecturing to other attorneys on the topic of real estate law and ethics. The full outline (copyright NBI 2015) may be accessed here: http://www.nbi-sems.com/Enbi/Faculty/68011.pdf

The outline for the ethics portion is as follows:

  1. Applying Rules of Professional Conduct in Real Estate Practice
  2. Multiple Representation and Conflicts of Interest
  3. Disclosure Requirements
  4. Dealing with Unrepresented Parties
  5. Attorney Fees

 

Philadelphia Quiet Title Lawyer

Philadelphia Quiet Title Lawyer

Harper J. Dimmerman, Attorney at Law, focuses his law practice of real estate law. He handles both litigation and transactional matters: (215) 545-0600. If you need an attorney for settlement, negotiation, For Sale by Owner (FSBO) transactions or litigation (mechanics’ liens, confession of judgment, partition, trespass, landlord tenant, foreclosure defense, ejectment, quiet title, breach of contract, contract litigation, seller disclosure fraud, home inspection cases, realtor negligence cases, amongst others).

According to the Philadelphia Common Pleas Court, an suit to quiet title may be used for the following purpose:

“Quiet Title

An action to quiet title is a lawsuit brought in a court having jurisdiction over land disputes, in order to establish a party’s title to real property against anyone and everyone, and thus “quiet” any challenges or claims to the title. It comprises a complaint that the ownership (title) of a parcel of land or other real property is defective in some fashion, typically where title to the property is ambiguous. A typical ground for complaint includes the fraudulent conveyance of a property, perhaps by a forged deed or under coercion. Unlike acquisition through a deed of sale, a quiet title action will give the party seeking such relief no cause of action against previous owners of the property.”

Keep in mind that if you believe you have been the victim of deed fraud, you have recourse and should act at once.

Philadelphia Confession of Judgment Defense

Philadelphia Confession of Judgment Defense

Harper J. Dimmerman, Attorney at Law, focuses his law practice of real estate law. He handles both litigation and transactional matters: (215) 545-0600. If you need an attorney for settlement, negotiation, For Sale by Owner (FSBO) transactions or litigation (mechanics’ liens, confession of judgment, partition, landlord tenant, foreclosure defense, ejectment, quiet title, breach of contract, contract litigation, seller disclosure fraud, home inspection cases, realtor negligence cases, amongst others).

Pennsylvania’s Rules of Civil Procedure does permit a defendant to challenge a confession judgment, which is mechanism employed by commercial lenders and landlords in the Commonwealth of Pennsylvania. Upon default, the lender or landlord may confess judgment, assuming that the proper contractual disclosures have been made. This remedy is generally perceived as highly draconian, in that the party alleging a default may have the ability to take an immediate judgment against the other party and for substantial sums of money. If you are the defendant in this type of action, it is imperative that you act promptly and assert any and all defenses. A party’s failure to do this could easily result in a crippling judgment against the defendant.

The pertinent Rule of Civil Procedure provides the following:

“Striking off or Opening Judgment. Pleadings. Procedure

(a)(1)  Relief from a judgment by confession shall be sought by petition. Except as provided in subparagraph (2), all grounds for relief whether to strike off the judgment or to open it must be asserted in a single petition. The petition may be filed in the county in which the judgment was originally entered, in any county to which the judgment has been transferred or in any other county in which the sheriff has received a writ of execution directed to the sheriff to enforce the judgment.

(2)  The ground that the waiver of the due process rights of notice and hearing was not voluntary, intelligent and knowing shall be raised only

(i)   in support of a further request for a stay of execution where the court has not stayed execution despite the timely filing of a petition for relief from the judgment and the presentation of prima facie evidence of a defense; and

(ii)   as provided by Rule 2958.3 or Rule 2973.3.

(3)  If written notice is served upon the petitioner pursuant to Rule 2956.1(c)(2) or Rule 2973.1(c), the petition shall be filed within thirty days after such service. Unless the defendant can demonstrate that there were compelling reasons for the delay, a petition not timely filed shall be denied.

(b)  If the petition states prima facie grounds for relief the court shall issue a rule to show cause and may grant a stay of proceedings. After being served with a copy of the petition the plaintiff shall file an answer on or before the return day of the rule. The return day of the rule shall be fixed by the court by local rule or special order

(c)  A party waives all defenses and objections which are not included in the petition or answer.

(d)  The petition and the rule to show cause and the answer shall be served as provided in Rule 440.

(e)  The court shall dispose of the rule on petition and answer, and on any testimony, depositions, admissions and other evidence. The court for cause shown may stay proceedings on the petition insofar as it seeks to open the judgment pending disposition of the application to strike off the judgment. If evidence is produced which in a jury trial would require the issues to be submitted to the jury the court shall open the judgment.

(f)  The lien of the judgment or of any levy or attachment shall be preserved while the proceedings to strike off or open the judgment are pending.

(g)(1)  A judgment shall not be stricken or opened because of a creditor’s failure to provide a debtor with instructions imposed by an existing statute, if any, regarding procedures to follow to strike a judgment or regarding any rights available to an incorrectly identified debtor.

(2)  Subdivision (g)(1) shall apply to (1) judgments entered prior to the effective date of subdivision (g) which have not been stricken or opened as of the effective date and (2) judgments entered on or after the effective date.”

Philadelphia Foreclosure Defense Lawyer

Philadelphia Foreclosure Defense Lawyer

Harper J. Dimmerman, Attorney at Law, focuses his law practice of real estate law. He handles both litigation and transactional matters. If you need an attorney for settlement, negotiation, For Sale by Owner transactions or litigation (mechanics’ liens, confession of judgment, partition, landlord tenant, foreclosure defense, ejectment, quiet title, breach of contract, contract litigation, seller disclosure fraud, home inspection cases, realtor negligence cases, amongst others).

It is critical that you defend the foreclosure litigation immediately, even if you may be endeavoring to achieve a short sale or work out some other agreement with the lender. Failure to respond accordingly will lead to a default judgment being taken against you, thereby making the prospect of resolving the situation amicably far more challenging. The failure to answer the complaint in foreclosure will be viewed by a court as an admission of the truth of all of the bank’s averments, some of which may not be entirely accurate. Finally, assuming that a court will simply permit the borrower to open that judgment and have a second bite at the apple, if you will, is a highly risky assumption.

Philadelphia Real Estate Lawyer

Philadelphia Real Estate Lawyer

Harper J. Dimmerman, Attorney at Law, focuses his law practice of real estate law. He handles both litigation and transactional matters. If you need an attorney for settlement, negotiation, For Sale by Owner transactions or litigation (mechanics’ liens, confession of judgment, partition, landlord tenant, foreclosure defense, ejectment, quiet title, breach of contract, contract litigation, seller disclosure fraud, home inspection cases, realtor negligence cases, amongst others).

Alert:

Philadelphia’s tax abatement program is a wonderful incentive for homebuyers. However, even when these abatements have been approved and advertised as such, buyers are running into a major problem upon taking ownership if the seller/selling entity has other outstanding tax liabilities with the City of Philadelphia. In these instances, the innocent buyer may not receive the benefit of the abatement, potentially costing that buyer(s) tens of thousands of dollars in unanticipated taxes. Thus, even with title insurance, it is essential that a real estate lawyer be engaged prior to closing to ensure that written documentation be obtained from the City of Philadelphia to confirm that the abatement is ripe.

Partition and Philadelphia Real Estate Law

Partition and Philadelphia Real Estate Law by Harper J. Dimmerman, Attorney at Law. Mr. Dimmerman handles real estate litigation and partition matters. Contact him now for a consultation – (215) 545-0600. His office is located in center city Philadelphia, Pennsylvania.

Co-owners of real estate have a right to partition. This is supported by the Pennsylvania Rules of Civil Procedure.

In a Philadelphia Common Pleas Court decision handed down in November, 2012, the trial court was asked to consider a partition claim by an ex-husband. More specifically, ex-husband argued that he still have a right to real estate, despite not having perfecting his economic claims during the divorce proceeding. Post-divorce, ex-husband filed a suit in partition (approximately one year later) and contended that an oral agreement existed which required the preparation and recording of a deed during the marriage; this never happened. The ex-wife denied the existence of such an agreement. The Philadelphia trial court analyzed the statute of frauds, in light of the claim that there was an oral contract. That statute prohibits the creation of interests in any land by parol evidence. This is particularly true where a spouse seeks to compel the specific performance of such a contract by the other spouse. Also, the payments of repairs and mortgage installments does not take the case away from the statute of frauds. Here the ex-husband could not meet the particularly high burden of proof required to prove the existence of an oral contract. These parties were not even tenants by the entireties while they married, stated the trial court.

Bottom line: always get every deal in writing.  

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 and Fraud Article co-authored by a Philadelphia Attorney

Real Estate Law and Fraud Article co-authored by a Philadelphia Attorney. Attorney Dimmerman offers free, initial consultations.

The Superior and Commonwealth Court Getting Aligned on the UTPCPL, “Legal Intelligencer” Article

Forcing adversaries to prove intent is where adept attorneys can easily earn their keep. Mounting the offensive is never an easy feat, especially when allegations of fraud require such a stringent inquiry into the mental processes of an oftentimes shrewd defendant. The stakes can be especially high too, with punitive damage or treble damage claims laying out there, as the case may be. And the icing on the crumbling cake of exposure are those occasional instances where the individual owner(s) of an entity behaves in a manner that gives rise to the potential for personal liability, losing the protection of the corporate veil.

Just last month, our Pennsylvania Superior Court handed down a critical decision in Bennett v. A.T. Masterpiece Homes at Broadsprings, LLC (Pa. Super. Ct., 1302 MDA 2011), a case that forms yet another chapter in the storied history of the well-intended Uniform Trade Practices Consumer Protection law. Perhaps at least a limited discussion of the origin of the Act is in order. Originally conceived as a statute affording private remedies to consumers of “goods or services”, the Act allowed for treble damages to be imposed on those who ran afoul of the statute. The Superior Court, in Gabriel v. O’Hara, 534 A.2d 488 (1987), expanded the Act’s scope by ruling that sales of residential real estate are also within its purview, a great day for righteous plaintiffs lawyers indeed. Resultantly, unfair trade claims are now included routinely in fraud litigation versus realtors, sellers, inspectors and developers.

Up until the mid-90’s, 1996 to be precise, the Act addressed only “fraudulent conduct.” And naturally this required a plaintiff to prove all the elements of common law fraud: proof that a material misrepresentation was made intentionally, or with reckless disregard of its truth inducing justifiable reliance and injury based on such reliance. Now however, the Act we have is the result of a concerted effort to expand the definition of conduct deemed to be “unfair or deceptive acts or practices.” This 1996 amendment broadened the definition of deceptive conduct within the “catchall” definition.

Despite the 1996 legislative amendment that added the phrase “deceptive conduct,” the Superior Court, by its own admission, required an aggrieved party to establish the elements of common law fraud under Act for liability to attach. In arguing for a reversal of the jury’s decision, Mr. Colledge, the Appellant here, heavily relied on Skurnowicz v. Lucci, 798 A.2d 788 (Pa. Super 2002), which held that there must be a showing of common law fraud. Hence, it was argued that not only should the UPTCL claim never have been submitted to a jury but also, in the alternative, the charge employing the phrase “misleading conduct” constituted misleading and reversible error.

A great deal of the Masterpiece Court’s analysis was consumed by the court’s defense of its holding that the trial judge’s instruction to the jury that “misleading conduct” under the Act’s “catchall” provision was not an error warranting reversal. But to get there, the Court had to explain away its line of cases that did in fact require the proof of fraud, cases handed down as late as2010. The Masterpiece Court cited to a litany of decisions in which either the Commonwealth of Eastern District Courts permitted liability based on the less stringent deceptive conduct standard. Holding otherwise would have led to a result that “ignore[d] the textual changes of the 1996 amendment as well as the rules of statutory construction.” “[W]here words of a statute differ from those of a previous one on the same subject they presumably are intended to have a different construction.”… and that “every word, sentence and provision of a statute must be given effect.” The legislature “does not intend a result that is absurd, unreasonable or impossible of execution.”

The Masterpiece case notably involved two (2) set of plaintiffs, the Bennett’s and Hoefferle’s, couples who felt compelled to commence an action against the same builder of their new homes. Apparently, numerous building deficiencies were endemic in both properties. The Hoefferles’ home contained non-grade lumber, floors that sagged and bounced, improperly installed insulation and clearances and ventilation and electrical systems completed in violation of code. Not only was a gas smell evident emanating from a basement, but the Masterpiece Court accepted the testimony of an engineering expert who opined that if corrective action had not been taken by Hofferle’s, there would have been structural failure in the sloping roof surface area. That expert also testified for the Bennett’s concerning foundational concerns and other comparable issues.

A bifurcated jury eventually concluded liability was founded under contract, warranty and UPTCPL theories. The statutory multiplier was utilized as well, awarding the Bennett’s about 50k and the Hoefflere’s a bit under 175k, inclusive of attorney’s fees. Critically also, as to piercing, it was determined that the assurances of the appellant, Mr. Colledge, rose to the level of a personal guarantee. The Court cited to statements such as “I will take care of it” and “I guarantee it,” which in its estimation constituted specific assumptions of personal liability.

Prior to the Masterpiece decision, the Pennsylvania Superior Court had repeatedly ruled that a plaintiff suing under the Act’s catchall provision must still prove all elements of common law fraud. However, the Masterpiece case now brings the Superior Court’s reading of the catchall phrase in line with the Commonwealth Court, the Bankruptcy Court and most rulings from the United States District Courts. Cohesion and clarity will assuredly make pursuing arguably deceptive consumer practices far easier. Sellers and service providers would be wise to take heed.

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Harper J Dimmerman is also an adjunct professor at Temple University’s Fox School of Business. His firm represents clients in general litigation, legal malpractice law, various land use, residential, commercial real estate and criminal law matters. They also provide approved attorney title insurance services and real estate consulting statewide. He can be reached via e-mail at harper@hjdlaw.net or telephone at 215-545-0600. James M. Lammendola is an Instructor at Temple University’s Fox School of Business who was in private practice for twenty years. He may be reached via e-mail at james.lammendola@temple.edu or telephone 267-254-3324.
Unauthorized reproduction is prohibited. ALM. 2012.

Real Estate Law Article co-authored by a Philadelphia Attorney

Major Developer Litigates with Contractor, Real Estate Law Article co-authored by a Philadelphia Attorney. Mr. Dimmerman offers free, initial consultations.

Toll Brothers Battles Contractor

In 2012, our Superior Court handed down an extremely well-reasoned opinion in J.J. DeLuca Company, Inc. v. Toll Brothers, Inc.The matter explored the contours of the gist of the action doctrine and punitive damages law within the framework of an extremely ambitious development project. Toll Brothers (TB), a local behemoth clearly in need of no introduction, has been aggressively developing communities, even during these economically precarious times, stimulating the local economy and responding to the needs of sophisticated homebuyers throughout the region. One of these efforts has unquestionably altered the complexion of the area just south of Fitler Square.

Naval Square, a grand-scale community, represents a highly complex undertaking. And for those history buffs amongst us, perhaps some very brief background is in order. According to TB’s website, the Philadelphia Naval Asylum first opened in 1834 and served as the first home of the U.S. Naval Academy and as the nation’s first retirement home for sailors and marines. One of the uses of the Naval Asylum was for the Philadelphia Naval School, an academy for midshipmen that was a precursor of the United States Naval Academy. The developer first acquired the subject property in 1988, many years before commencing formal development. Eventually, TB spearheaded major construction efforts at the approximately 20-acre site, expending tens of millions of dollars to create a picturesque gated community, with both single-family as well as condominium offerings. The stunning focal point, Biddle Hall, was formerly the Surgeon’s residence and designed by architect William Strickland. Well preserved, the structure represents a quintessential example of Greek Revival architecture in the United States.

Needless to say, in addition to the intensive planning and designing assuredly involved with such a massive project, numerous contractual relationships were either established or forged. One such alliance was created with the underlying plaintiff in the fairly protracted piece of litigation, J.J. Deluca Company, Inc. (DeLuca). Deluca was engaged to serve as the GC for the approximately 79M project. According to the decision, in addition to other compensation, TB had agreed to remit 3.5 percent of the total billings, representing a management/administrative fee for their anticipated efforts. Unfortunately however, disagreement ensued concerning the timeliness of permit acquisition, drawings and performance. In addition to scheduling gripes, TB also raised concerns with the quality of the workmanship. Deluca took the position that some of these claimed delays had actually been caused by TB.

At any rate, bad blood developed between the parties and TB elected to take back control of the entire project. After extensive negotiation, a Termination for Convenience Agreement (TCA) was executed, memorializing the parameters of the fissure, including limiting the types of claims that could be brought in the event of future litigation. In March of 2007, after mediation efforts broke down, DeLuca sued TB for amounts held back by Toll under a 10% retainage arrangement. The complaint alleged breach of contract, unjust enrichment, quantum meruit,and violation of the Contractor and Subcontractor Payment Act (CASPA), 73 P.S. §§ 501-516 theories. Originally, DeLuca pursued damages to the tune of about 4M, not an insignificant sum. TB counterclaimed for cost overruns, costs of completion, unanticipated personnel costs, and liquidated damages. Evidence developed by TB during discovery confirmed that subcontractors, including Brookside Construction, had been directed by DeLuca personnel to submit invoices to TB for work not actually performed at the site. Over DeLuca’s objection, the trial court permitted TB to amend and include a fraud count. As for plaintiff’s fraudulent billing claims, these were eventually withdrawn. After a bench trial, the trial court awarded about 1.2M to DeLuca. Post-trial motions were submitted and that court revised its original verdict, increasing the award amount to about 2.1M. Motions for attorneys’ fees were denied “because neither party is the ‘substantially prevailing party’ under CASPA as were claims for interest, not preserved under the TCA and therefore waived. Albeit that court acknowledged TB’s discovery of “pervasive significant fraud” committed by DeLuca, it declared that “all such sums have been voluntarily withdrawn or ruled not owed.” TB’s punitive damages claim had been deemed waived as well and subsequently both parties appealed.

On appeal, a Superior Court panel vacated the original judgment and remanded the case, deciding that the trial court erroneously concluded that TB’s claim for punitive damages had been waived. On remand, and after briefs and further argument, the lower court entered a 4.5M verdict in favor of TB on the punitive damages claim, resulting in a net award to TB of about 2.4M. Post-trial motions followed yet again, with the trial court essentially reaffirming itself, except with respect to the punitive damages. Timely cross appeals were eventually filed as well. Although DeLuca raised numerous issues on appeal, the thrust of its efforts concerned the evisceration of TB’s fraud and punitive damages claims. For instance, DeLuca contended that the lower court failed to find that fraud had even occurred. Additionally, at least in DeLuca’s estimation, TB waived any fraud claim by failing to preserve such a theory in the TCA.

The Superior Court easily rejected these attacks however, citing to “express and unequivocal” findings of fraud below and reminding the litigants of the duty of good faith and fair dealing implied in every contract. A statute of limitations defense had also been asserted yet was highly attenuated, at best, in the face of active concealment, a theory the lower court found to be an insurmountable impediment. Most notably, DeLuca contended that TB’s fraud claim should have properly been barred by the gist of the action doctrine. The Superior Court easily concluded however that TB’s fraud did not arise out of the performance of the contract. Rather, it was DeLuca’s fraudulent billing scheme that gave rise to such a claim. Furthermore, “DeLuca had an independent, societal duty not to defraud [TB], or any other comparably situated party.” Lastly, “[p]roof of the fraud is an independent and self-sufficient basis for recovery.” As for the punitive damages challenge, a multi-prong attack, the Superior Court could not concur that such an award had not been constitutionally warranted, especially in light of such egregious conduct committed by a business. The separate basis for fraud and the associated evidence proved too severe for DeLuca’s “mathematical gyrations.” Practitioners advising defense clients would be particularly wise to understand the bounds of their client’s conduct before rejecting tort claims willy-nilly.

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Harper J. Dimmerman is an adjunct professor at Temple University’s Fox School of Business. Bradley J. Osborne was an attorney in Mr. Dimmerman’s office. His firm represents clients in various litigation and real estate law matters. He may be reached at harper@hjdlaw.net or 215-545-0600.

James M. Lammendola is an Instructor at Temple University’s Fox School of Business who was in private practice for twenty years. He may be reached via e-mail at james.lammendola@temple.edu or telephone 267-254-3324.

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.