Legal Options If a Home Seller Lies or Conceals a Defect in Colorado

If you weren't told of an existing defect in the house you bought, the burden should not fall on your shoulders alone.

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Savvy home buyers often try to learn as much as possible about the physical condition of the property before closing, typically relying on information from the seller, the seller’s agent, and the home inspector. What happens if a week, a month, or two years after you close on your house you find that the information was wrong – or even fraudulent? Home buyers in Colorado have several options to consider.

No matter how new or how updated, a house is seldom perfect, and problems will emerge and develop over the course of your ownership. However, there is a difference between minor and major problems. Paint that’s chipping or a ceiling fan that stops working the first time you turn it on are likely minor concerns; however, a sinking foundation, roof leakage, or the discovery of a dangerous electrical condition might constitute major problems. Start by determining what type of problem you’re facing. If it’s a minor problem, or a new one that has more to do with the aging of the house than with any concealment on the part of the seller, you can fix it yourself; if it’s more substantial and seems unlikely to have just developed overnight, it might be time to consider other options.

Will a Warranty or Insurance Cover the Problem?

As a first step, it is not usually the most effective use of your time and money to sue someone. If you realize it is impractical to fix the problem yourself, start by checking whether a warranty or insurance will cover repairing or replacing the defect.

Warranty

Does the issue concern an appliance or a feature of the house that is new or upon which work was recently completed? If yes, did you inherit a warranty for the issue with the house? Contacting the company and asserting your rights under the warranty might be a quick and easy solution to the problem

Insurance

If the issue cannot be fixed by a warranty, is it covered by your homeowners’ insurance? A simple call to your insurance agent will likely answer any questions you have. For advice on working with your insurance company, see Nolo's article After the Fire: Dealing with Your Insurance Company. Also, if you live in a townhome community or a condominium, don’t forget to call the community’s management company. Whatever repair you’re seeking might be considered a common element or limited common element which might be repaired by the homeowners'/condominium owners’ association.

Is Another Person Liable?

If neither a warranty nor insurance provides a solution, it might be time to determine whether someone else has responsibility for the home defect. Is it likely the defect was present when you purchased the house? If so, did you rely on a statement from the seller, the seller’s agent, or your inspector when assessing the quality and condition of your home? Could one of those people have informed you about the problem at the time of sale? If not, you your case will be weaker; however, if you answered “yes” to any of those questions, your case is stronger. Look to your home purchase documents (which you received or signed in the course of purchasing your home). The primary documents to look for include:

  • contract for purchase/sale of property
  • seller’s disclosures, and
  • inspection report (if you received one).

The Colorado Seller's Disclosure Form contains a warning to the seller that failure to disclose a known material defect may result in legal liability. That liability is based on the seller’s current, actual knowledge as of the date of signing the disclosure.

For example, if the issue is a leaky roof, review the seller’s disclosure form to see how the seller rated the roof. Also review the inspection report to see whether the condition of the roof was noted there. If either of these documents indicated the roof was in poor condition, you were considered legally “on notice” of the problem when you bought the house. In that case, your case will be extremely weak. However, hypothetically, if the Seller Disclosure Form shows that the roof was in good condition, it is possible the person who signed the document either lied or withheld the relevant information.

Who Is Responsible Now?

The person who signed the Colorado Seller Disclosure Form is the person most likely to be held legally responsible for the relevant lie or omission. In addition to whatever was indicated in your purchasing documents, Colorado state statute assigns certain topic-specific disclosure responsibilities to certain individuals – specifically the seller and the seller’s agent, as follows.

Seller Disclosure Responsibilities

The seller is responsible for disclosing:

  • Whether the property is in a special taxing district. The buyer can claim relief in the form of damages resulting from nondisclosure as well as court costs. (See C.R.S.A. § 38-35.7-101.)
  • Whether the property is in a common interest community. The buyer has a claim for relief against seller for actual damages directly and proximately caused by the failure to disclose, plus court costs. (See C.R.S.A. § 38-35.7-102.
  • Whether the property has been used as a meth lab. There’s an exception if the previous lab has been cleaned up and removed according to state standards. A seller who fails to make this disclosure is liable for costs of fixing the problem (as determined by the state board of health); costs relating to health-related injury; and reasonable attorney fees for collection of costs from the seller. Claims related to the existence of a meth lab must be brought in court not later than three years after the date of closing. C.R.S.A. § 38-35.7-103.
  • What the property’s source of potable water is.

See the Nolo article Home Sellers in Colorado: Your Disclosure Responsibilities for more on the subject.

Agent Disclosure Responsibilities

The seller’s agent is responsible for disclosing adverse material facts actually known by the agent (without actually inspecting it). There is an exception for facts psychologically impacting the property such as whether a murder or suicide occurred there.(See C.R.S.A. § 12-61-804.) See the Nolo article Required Broker Disclosures When Selling a Home in Colorado for more on the subject.

What’s Next?

If you determine that you were lied to or not given correct information by the seller and/or agent, and you relied on that misinformation when purchasing your home, you likely have a legal case. (See the Nolo article Home Defects: Sue the Seller for more on this.) Pursuing remedies in a court of law is costly, however. Make sure the amount of damages you are seeking is worth the effort and expense of taking the case to court.

Small claims court may be your best option depending on the amount of your claim (Colorado small claims court has a limit of $7,500). See the Small Claims Court section of Nolo's site for useful articles on the subject.

by: Brittany Scantland-Lall

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