Legal Remedies If A Home Seller Lies or Conceals a Defect in Illinois

What if the house you just purchased suddenly springs a leak, or you find termites lurking underneath new siding, or a family member becomes ill from black mold? Many things can go wrong in an existing house, be it several years old, or just a few.

You might discover the problem when you take possession, or you might discover it weeks, months or years later. Do you have to pay for the repairs, or is it possible that someone else is at fault, and should pay? If someone else is responsible, how do you get that party to pay their fair share? Do you have to file a lawsuit or are there other ways of obtaining compensation for your losses?

This article will examine which parties may be liable to you, as the home buyer, for defects in your previously constructed home that stemmed from before the purchase date, the remedies to which you may be entitled, and suggested actions to consider when you find a home defect.

Recognize, however, that no home comes with a guarantee that it will remain in the same condition it was when you bought it. If your home develops new problems, or suffers the effects of aging, these are not issues you can take up with anyone who was involved in selling it to you except in the unusual case where the seller specifically provided a warranty to cover that issue. New problems are the reasons that you buy homeowner's insurance and perhaps a home warranty (covering repairs of major appliances and home systems) for the property.

Who May Be Responsible?

When determining who may be responsible to pay you for home defects, you can start by identifying the parties who were involved in your home purchase. These potentially responsible parties include:

• the seller
• the listing broker
• your broker, and
• your home inspector.

There's no need to choose among these. You can file suit or pursue other appropriate remedies against any of all of them, if they're at fault.

Do You Have a Case Against Any of These Parties?

Once you have identified potentially responsible parties, you'll want to determine whether any of them did, or failed to do, anything that could make them liable to you. Let's take a closer look at the situations that may make each possible party liable to you.

Seller Liability

The seller may be liable to you for:

• failing to disclose a defect, or
• transferring a piece of property that wasn't in operating condition as promised under a warranty or other obligations set forth in your purchase contract.

In Illinois, sellers may be responsible to buyers for home defects under the Illinois Residential Real Property Disclosure Act (the Disclosure Act). (765 ILCS 77/1.) The Act requires Sellers to check off defects from a list of potential defects set forth in the law, and to explain them in detail.

If a known defect on the list the seller gave you was not checked and explained, and you have evidence that the seller knew about the defect (or in some cases, should have known about it) at the time of sale, the seller may be liable to you. The seller may also be liable to you for failing to disclose property defects under Illinois common fraud and negligence laws. For more information about the seller's disclosure responsibilities, see Nolo's article: "Illinois Home Sellers: Disclosures Required Under State Law."

Whether or not the seller is liable to you under your purchase contract depends on what it says. In some form contracts frequently used in the Chicago Area, the seller gives a warranty guaranteeing that certain fixtures, appliances, components, and systems sold along with the property will be in operating condition at the time of the closing, or when possession is transferred if before or after the closing.

Read your contract carefully, because the seller's liability varies depending upon the specific language of the contract form used. Be ready to act quickly in such a case. The longer you wait after the closing to raise such a seller-warranty issue, the more it may appear that you're raising a newly developed, not latent problem.

Broker Liability

The property's listing broker may be liable to you for failure to disclose a known defect, or for failing to investigate and confirm information about the property included in any listing sheet or advertisements for the sale of the property, under the Real Estate License Act of 2000 (RELA) (225 ILCS 454/1). Any broker who was involved in your purchase may be liable for false or misleading statements under the Illinois Consumer Fraud and Deceptive Business Practices Act (the Illinois Consumer Fraud Act) (815 ILCS 505/1). Similar to the seller, a broker may also be liable to you under case law for fraud or negligent misrepresentation. For more information about brokers' responsibilities and potential liability to a buyer, see Nolo's Article: "Home Sales in Illinois: What the Listing Real Estate Broker Must Disclose."

Inspector Liability

Your home inspector may be liable to you for failing to list the defect in the in the inspection report you received prior to closing. In Illinois, the Department Of Financial And Professional Regulation has set minimum standards for home inspections. (68 Ill. Admin. Code §1410.200.)

These standards require the inspector to list the systems and components to be inspected in a written contract with you, and provide you with a report that describes the inspection results. In the inspection report, the inspector should specify those systems found to be unsafe or not functioning, and state whether each reported deficiency should be corrected or monitored. Again, you will want to look for evidence that the inspector actually saw, or should have seen the defect in question.

The inspector may have limited his or her liability to you in the inspection contract. Common liability limitations include: time limits for making claims, written claims-notification requirements, or a cap on the damages the inspector may owe you, set at the price of the inspection. For example with respect to the cap, if you paid $250 for the inspection, but the overlooked defect cost several thousand dollars to repair, the inspector would owe you only the $250. (See Zerjal v. Daech & Bauer Constr. Inc., 405 Ill.App.3d 907 (Ill. App., 2010).)

What to Do When You Discover a Home Defect

It is important to act quickly after discovering a home defect, because liability is limited by time. Take steps to protect your rights immediately, in particular by:

• reviewing your purchase contract for seller's warranties and obligations
• reviewing your inspection contract and report to determine whether the defect should have been found, and whether the contract limits liability or contains a claims procedure you must follow
• investigating—ask your neighbors or local officials whether they know anything about the defect or ever saw any workmen , or issued construction or repair permits; and consider hiring an inspector to assess what conditions would have been present and visible at the time of sale, and
• writing a demand letter to the party you believe is responsible, describing the defect, why the party is responsible, and asking for a specific repair, or dollar amount for the repair (this is a good way to avoid a lawsuit, but also serves as excellent evidence regarding the nature of your claim and your attempts to take appropriate action if you decide to sue).

You may wish to contact the attorney who closed your purchase, or another experienced real estate attorney to help you with these steps.

Should You Sue or Try Something Else Before Suing?

A strong demand letter that describes the defect, and the reasons you believe the party is responsible, may persuade that party to compensate you without a lawsuit. If you are unable to reach a settlement, you may file a lawsuit or seek some alternative dispute resolution such as mediation.

Lately, more people are relying upon mediation to solve property defect disputes. The mediator acts as a disinterested third party who helps reach a voluntary agreement. Some Illinois courts provide voluntary mediation at no charge, and some even require court-provided mediation before the judge will hear the case. However, most often, the parties choose a private mediator, and split the mediator's fee.

If mediation is not required by the court and you feel that it is not appropriate for your situation, or your attempt at mediation is simply unsuccessful, you may file a lawsuit. The filing procedure depends upon the particular law under which you claim damages and the amount of damages sought. You may file a claim in Illinois small claims court if you seek damages of $10,000 or less.

How Much Compensation You Can Ask For

The type of compensation you may win depends on the law that makes the other party responsible. Under the Disclosure Act and the Illinois Consumer Fraud Act, you may win actual damages, usually calculated as the cost of the necessary repairs, court costs, and attorney's fees. Under the Illinois Consumer Fraud Act, you may also win punitive damages –damages not simply to compensate you for a loss, but to punish the deceiving party.

Under general fraud laws, damages are calculated to give you the benefit of your original bargain -- the difference between the value of the property without the defect and the actual value of the property.