When you bought your home in Alaska, you probably thought your closing was the “Final Frontier” of a lengthy process. Unfortunately for some buyers, the stress and uncertainty of the process does not end there. Imagine that, after you move in, you discover a serious problem: perhaps the heating system shuts off without warning, the asbestos ceiling tiles are crumbling, or there's a dangerous gas leak. Neither the seller nor the seller’s real estate agent mentioned these problems to you. You feel duped. Worse yet, you will be forced to incur many thousands of dollars in expenses to make repairs.
Under Alaska law, did the seller have an obligation to inform you about these problems? And do you have any legal recourse against the seller?
A useful place to begin thinking about your legal strategy is with Alaska Stat. 34.70 et seq., the statute that broadly covers disclosure requirements for home sellers in Alaska.
The statute provides that, before the buyer of residential real property makes a written offer, "the transferor shall deliver by mail or in person a completed written disclosure statement.” This applies not merely to direct sales, but also to exchanges of land (such as trades of one parcel for another) and to leases where the buyer has the option to purchase.
It makes sense that the seller must give you the disclosure statement before you make your formal offer to purchase, since the price you offered was probably based upon the condition of the property. (Any buyer would offer more for a home with a new roof than for the same home with a leaky roof.)
What, exactly, did the seller need to disclose to you? Unlike in some states, Alaska’s legislation does not specifically state what areas or aspects of the property require some sort of disclosure. Instead, the legislation outsources the creation of the particular disclosure requirements to Alaska’s Department of Commerce, Community, and Economic Development, which has created a sample form. This form covers the information that the seller should have disclosed to you.
The form required the seller to check various boxes indicating whether various defects exist on dozens of locations on the property. For example, if the seller knew that the HVAC system did not work, the appropriate box should be checked alongside that item. The idea, of course, is to alert potential buyers like yourself to these issues.
Interestingly, Alaska’s disclosure form is somewhat unique in that sellers are also required to estimate monthly utility costs. The form specifically lists gas, electric, oil, propane, wood, coal, water, sewer, and refuse. If the seller reported dramatically lower utility costs than what you are now facing, this could also constitute a breach of the seller’s disclosure obligations.
If you discover a surprise defect in your new Alaska home, what should you do? Take a look at the disclosure form, which is probably in your files from the closing. You should begin by considering what, if anything, the seller said about the condition you are now facing.
If the seller disclosed the condition, and you overlooked this or chose to move ahead with the purchase regardless, you will likely not be able to recover damages. A seller’s honest disclosure of a defect generally insulates him or her from legal liability. According to Alaska Stat. 34.70.30: “A transferor is not liable for a defect or other condition in the real property or the real property interest being transferred if the transferor discloses the existence of the defect or condition in the disclosure statement.”
If the seller did not disclose the condition, however, Alaska provides for strict penalties for those who violate the disclosure requirements. Alaska Stat. 34.70.90 notes that a seller who willfully violates this chapter or fails to perform a duty it requires is liable to the buyer for up to three times the actual damages suffered as a result. In plain English, this means that if the seller purposefully failed to disclose a material defect on the form, the seller could be held liable for three times the cost of repairing that defect. This is an extremely buyer-friendly remedy.
Moreover, Alaska Stat. 34.70.60 mandates that all disclosures must be made in “good faith;” which means, essentially, that the home seller should not try to use clever language or other such tactics to obfuscate material defects in the property. Alaska’s legislature is trying to incentivize honesty.
In addition to having possible grounds for a lawsuit under this statutory cause of action, you might also consider suing your seller for breach of contract or fraud. Under Alaska law, fraud occurs where one party made a statement that was knowingly false to induce another party to take an action. Imagine that the seller told you that he would have all mold removed before you moved into the home. But upon moving in, you discover that he never did so. Clearly, the seller made a knowingly false statement to induce you to buy the home.
Similarly, you may have a breach of contract cause of action against the seller if the language of your contract made certain guarantees. For example, your purchase contract might specifically state that the kitchen flooring would be retiled before the sale. If this turns out not to be have happened, the seller may be in breach.
If you find these sorts of defects in your home, be sure to act speedily. You or your Alaska-licensed attorney should write to the seller, agent, or both, stating the problem and outlining your costs. Demand letters can sometimes make a potential defendant eager to settle a dispute before it erupts into a full-blown lawsuit. If the amount of your damages is significant, consider a consultation with a real estate attorney. Often, demand letters will be taken more seriously when they arrive on law firm letterhead, since it shows the potential defendant that you are strongly considering legal recourse.
Finding undisclosed material defects in your new home can be stressful and expensive. But you are fortunate to live in Alaska, which has extremely buyer-friendly legislation, providing for potentially large punitive damages from the seller.