Legal Remedies If a Home Seller Lies or Conceals a Defect in Utah

If you're a Utah homeowner and discover defects that were undisclosed, here's what to do.

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After you purchase a home in Utah, you will hopefully never need the services of an attorney. However, despite the best efforts of real estate agents, lending officers, title and escrow agents, and appraisers, sometimes a person buys a home only to discover that it is damaged or defective in some way – and may require costly repairs. In some cases, the previous homeowner lied or concealed a defect.

As described in “Home Sellers in Utah: Your Disclosure Obligations,” Utah home sellers are expected to make certain disclosures to buyers about the physical condition of the home before the sale. This article will explore what legal remedies you might pursue against a home seller who apparently didn’t meet this obligation, or who lied outright about the condition of the property.

Contact Your Insurance Carrier

Insurance coverage can provide a quick remedy in a number of situations. You may want to review your policy and/or contact your insurance company to inquire as to whether you have coverage for the type of problem you’ve encountered. While your homeowner’s policy may not cover a defect that was created by the previous owner’s negligence, it’s worth ruling out this source of compensation before trying more expensive and difficult remedies.

Figure Out When the Defect Developed

Some problems with a home may have existed before closing. Some will arise as you own the home. Unless you can establish with certainty that the problem existed before the closing, you have no way of holding the seller responsible.

This may require professional assistance. For example, you may notice that the basement floor is slanted and uneven, but be unable to tell why, or remember what it looked like when you bought the home. In such a situation, consider consulting a contractor or home builder, who may be able to find the origin of the problem and therefore figure out when the problem first developed.

Determine Whether the Seller Disclosed the Defect

The next step is to determine whether the seller disclosed the defect. Review your seller’s disclosures, which categorically list potential issues with a home and require the seller to answer questions about them. For example, if you have discovered a roof problem that apparently preceded the closing, you should be able to find a question on the disclosure form specifically asking the seller to affirm that there were no problems with the roof or to describe any problems affecting the roof.

In some cases, buyers are disappointed to discover that the problem was disclosed, but that they overlooked it. If, however, the seller claimed that the roof had no defects, and you believe that the seller knew otherwise, you are that much closer to a claim against the seller for fraud.

You should also review any other communication that the seller made. Check the original MLS listing, brochures, emails, letters, and any other information you received from the seller.

You may discover that the information within these communications is false. For example, the seller’s MLS listing may advertise a new water heater, when, in fact, the water heater turns out to be many years old and defective. If you relied on any communication that the seller provided to you, the communication turns out to be false, and the seller knew it was false, the seller may be held accountable for fraud.

Investigate Whether the Seller Knew About the Defect

In some situations, the seller may have simply not known about the defect. Perhaps the main water pipe was too small, and burst after you moved into your home. While the underlying defect obviously existed prior to your move in, the previous homeowner may have lived there for years without observing any problem. A seller can’t disclose problems that the seller never knew about.

You may, however, be able to find evidence that the seller knew about the problem. Neighbors are a frequent source of information, perhaps if they saw plumbing trucks at the property on numerous occasions, watched the dirt being dug up for new piping, or heard the seller’s complaints about the property. Contractors can be another good resource, if they spot evidence of past repairs.

Sometimes, the law allows knowledge to be “imputed” to a seller. This is also sometimes referred to as “constructive” knowledge. It means that even if you can’t prove that the seller knew about the problem, you can show that the seller encountered enough relevant facts that he or she couldn’t have ignored it. For example, a seller who claims not to have known that there was a defect in the stairway railing is going to have a hard time convincing a judge of his lack of knowledge if a section of the railing is missing altogether.

Potential Claims Against the Seller

If the seller knew about or should have known about a problem with the home, but chose not to disclose it, you may have a claim for fraudulent nondisclosure. While a Utah home seller does not have to disclose every conceivable problem with a home, the seller may be liable for failing to disclose known, hidden defects that a reasonably prudent buyer would not have discovered during a typical inspection.

In cases where the seller knew a about a defect, but lied outright, you may have a claim for fraud. Fraud is slightly different than fraudulent nondisclosure, but both entitle you to a remedy. The following will discuss these remedies.

Remedies for Fraud

The most basic remedy is a lawsuit against the seller for the cost to repair the defect and any additional damage caused by the defect. One example of this would be water damage caused by undisclosed, defective piping. You would most likely be entitled to receive money compensation to repair the pipe and money to repair or replace any damaged personal property.

You might also be entitled to a recovery if you are injured by the defect; for example, if it caused a fire or a slip and fall. If this is how you discovered the defect in your home, you could be entitled to compensation for your injury as well as for the cost to repair the defect.

Perhaps you want to simply get your money back and return the house to the seller. “Rescission” is a term attorneys use to refer to cancellation of a contract. Courts in Utah are more likely to award money damages than to award you a judgment rescinding the contract. If you continue to live in the home after you discover the defect and attempt to make the home “work for you,” you may not be able to rescind the contract. That said, you should carefully discuss this option with your attorney to determine whether your situation warrants this remedy.

In unusual situations, a court may also award punitive damages. (See Utah Code Annot. §78B-8-201.) Punitive damages mean that a seller has to pay you money as a penalty, in addition to the amount needed to fix the problem. Courts award punitive damages when a seller’s actions were willful, malicious, fraudulent, or showed a disregard for the buyer’s rights. While courts are hesitant to award punitive damages, you may be entitled to them if the seller’s fraud was so egregious that the court wants to discourage the seller from ever engaging in similar conduct again.

In all of the above situations, Utah courts are available to provide you with compensation so that you get the benefit of what you bargained for when you purchased the home. Know that home buyers are, in many situations, entitled to have the undisclosed defect fixed, and good luck.

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