Full Disclosure: How to Deal with Non-disclosed Repairs
September 1, 2021
In SPDS fraud cases, one of the most common concerns I hear from buyers is whether they can win if the Seller claims he sincerely thought the problem had been repaired. Often, this comes after slipshod repairs concealed a problem just through closing.
For example, a Seller may attempt to deal with a mold problem by simply cleaning up the visible mold. But he didn’t realize that there was a need to check for mold throughout the rest of the house, and that mold remained. In that case, the Seller’s “repair” simply concealed the mold from a buyer who otherwise would have chosen a different house.
Problems like this can be expensive for buyers. Mold remediation can get expensive when it gets deep into a house. And it often creates a situation where extensive remodeling is required. Unexpected problems like this can cost an extra 20 to 50 percent of the home price and ruin home affordability for buyers.
Fortunately, Arizona law and the standard AAR forms are robust enough to protect buyers from that type of surprise. Qualified counsel can help them overcome that issue. When that type of concern comes up, buyers can protect themselves by leaning into the SPDS language. Most questions ask about past or present problems. As an example of this, I once tried a case against Sellers who lied about a history of problems with the main water line. They attempted to fix it themselves. At a minimum, something that motivated a seller to attempt a repair is a past problem, and the seller must disclose that it occurred.
Moreover, the SPDS also covers work done on the property. Meaning that a person who fully answers this will not only disclose the repair, but also whether that repair was made by a licensed contractor. The more significant the repair, the more important it is to a reasonable buyer that the repair be performed by a licensed contractor. And a Seller who doesn’t disclose that license status is again breaching his disclosure obligation.
That disclosure obligation exposes the Seller to serious liability. In fact, one of my standard practices is to cross-examine the Seller about warnings on the front of the SPDS to heighten the importance of what he writes there. For example, I walk the Seller through admitting that he received a written warning titled: “When in doubt, Disclose!” In fact, that warning is in bold-faced type. It’s in all caps. And it’s at the very top of the page. You can’t miss it. It also includes the following statement, both underlined and bolded: “If you do not make the legally required disclosures, you may be subject to civil liability.” It warns the Seller that they “should complete the SPDS by answering all questions as truthfully and as thoroughly as possible.”
Samuel Doncaster is a trial lawyer who’s very active in real estate fraud cases. He routinely helps people get their money back when they’ve been cheated in real estate deals. If you have a client who needs help with a disclosure issue, you can help them set an appointment by calling 480-666-4054 for a strategy session. That strategy session comes with a risk-free, 100% money-back guarantee.