Unlike in many other U.S. states, Alabama law employs a rule known as caveat emptor for the sale of used residential property. Caveat emptor is Latin for “let the buyer beware,” which means that the seller has no actual duty to advise the buyer of issues with the property’s physical condition during the sale. (Many states require sellers to formally disclose such issues, often by filling out a standard form.) Alabama's rule usually places the responsibility of discovering defects upon the buyer.
As a home seller in Alabama, however, you’re not completely off the hook. This article will discuss situations in which you will need to alert prospective home buyers to issues concerning your property.
There are three exceptions to caveat emptor in Alabama, in which sellers become legally responsible for disclosing defects to the buyer:
1) if a fiduciary relationship exists between buyer and seller
2) if the seller knows the home may pose a health or safety risk to the buyer, and
3) if the buyer directly questions the seller on specific defects.
In the above instances, the seller must disclose those defects with which he or she is personally familiar.
What’s a fiduciary duty? It is a legal responsibility to act in another party’s best interest; such as if the seller was the buyer’s attorney or medical doctor. If the seller is the buyer’s medical doctor and knows the buyer is allergic to cedar, failing to disclose that the house has cedar closets may be a breach of fiduciary duty.
What does it mean that Alabama’s health and safety guidelines require home sellers to notify potential buyers of defects that may pose a direct threat to the buyers’ health or safety? One example of a health and safety defect would be if a seller knows the home has lead paint or contains asbestos. In that situation, the seller must notify any potential buyers of the lead paint and asbestos present in the home.
Lastly, if a buyer specifically inquires about a defect, Alabama law requires the seller to answer honestly and to disclose known defects. So, for example, if the buyer asks about pest infestations and the seller fails to mention the termite remediation done last year that would be a violation of the law. The seller should not lie or try to hide the truth from the buyer, as that will only make the situation worse (and the buyer, angrier) later.
A seller who fails to disclose known material defects to a buyer may be liable for damages. A buyer who discovers a defect the seller failed to disclose can sue the seller for misrepresentation, negligence, suppression of material facts, or even fraud. But, under Alabama law, the failure to disclose a known defect alone may not be sufficient to hold a seller liable for damages. The buyer would have to show that the seller knew that that the defect posed a direct threat to his or her health or safety, which may be fairly difficult to prove, depending upon the circumstances.
Although Alabama law does not require sellers to provide a laundry list of defects to potential buyers, smart buyers will disclose material defects as a risk-management tool. One way of doing so is to complete a property disclosure form and give it to the buyer during the sale.
The purpose of the disclosure form is to aid both purchasers and sellers in identifying aspects of properties that may require attention: health, safety, environmental, structural, mechanical, or other potential problem areas. The disclosure form is usually fairly detailed and asks for information on the condition of such things as the roof, plumbing, boundaries, heating and air conditioning systems, and other items.
Most Alabama real estate agents attach a completed disclosure form, created by the Alabama Association of Realtors, as an exhibit to the purchase and sale agreement. Typically, the real estate agent will give the disclosure form to the seller to complete and sign at the time the seller lists the house with the agent.
The seller’s agent will then furnish a copy of the disclosure to any potential buyer who wants more information about the property before the signing. If you are selling your property without the aid of a real estate agent, you may be able to find a comprehensive form with a bit of research online or at your local library.
Although an Alabama seller is not legally required to fill out the form, providing a buyer with the completed statement, or a similar disclosure statement, is a good way to make sure you are making all the disclosures legally required of you. Once you have completed the disclosure form, be sure the buyer acknowledges receipt by signing and dating the forms. Or at the very least, have the buyer affirm receipt of your disclosures in a separate writing such as an email or letter.
Alabama home sellers, like those across the country, must comply with federal legal requirements regarding lead disclosures, as described in Nolo’s article, “Seller Responsibility to Disclose Lead-Based Paint Hazards.”
Another way in which an Alabama seller can protect him- or herself from a lawsuit and comply with the laws requiring disclosure of known health and safety risks is to encourage the buyer to commission a home inspection before the closing.
If the buyer’s inspection turns up significant material defects, you’ll probably need to return to the negotiation table to discuss who pays for any costly needed repairs or replacements. A common solution may include having the seller repair the defect or lower the asking price to allow the buyer to correct the defect after purchase – which is still cheaper than facing a later lawsuit.
If you have concerns about what you need to disclose about your home, or other questions about your sale, discuss them with your listing agent or contact a real estate professional or an attorney in your area for help.