No Relationship, No Failure to Disclose!

Many factors are weighed before most buyers decide to proceed with a purchase of real estate. Many buyers, both commercial and residential, will seek information about the property from a variety of sources. Aside from consulting with their realtors, they may ask questions of insurance agents, home inspectors, or even neighboring owners.

Sometimes, buyers experience what we call “buyer’s remorse.” This usually happens when aspects of the property do not match their expectations. When those expectations are based on advice they sought before completing the purchase, the buyer can feel understandably tricked or even manipulated into the decision to go forward with purchasing the property.

Occasionally the grievance is so serious that the buyer decides to pursue a “nondisclosure” lawsuit. What this means is that someone involved in the transaction, usually one who had a legal duty to disclose material information, either failed to do so or even outright lied.

If the person who failed to disclose information was the seller or the seller’s or buyer’s real estate agent/broker, there are statutory and case law standards that govern what must be disclosed during a residential real estate purchase. Generally, the seller and real estate agents have a duty to disclose everything that they know or, under limited circumstances, should know that materially affects the value and desirability of the real property. For example, if the buyer obtained inaccurate information from a neighbor about easements across the property and then relied on the information obtained in making the decision to purchase the property, liability is very questionable because the buyer had actual information in hand from the title report before closing escrow. But if some information materially affecting the property is known to the seller and the seller fails to disclose this information to the potential buyer, the potential for liability is much stronger.

Courts will generally find that a defendant cannot be held liable for nondisclosure when there is no relationship between the defendant and the plaintiff. The bottom line is that a buyer must first establish whether the potential defendant even had a legal duty to disclose in the first place. If there is no duty then there is no obligation to disclose. Additionally, the litigation process to seek redress for an alleged failure to disclose is both expensive and complicated! This is an issue buyers should discuss with an experienced real estate attorney before jumping to any conclusions.

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