Many Americans think of Hawaii as the perfect vacation paradise. But with nearly 1.5 million people making the home in the Aloha State, it stands to reason that not every home is a resort paradise. Imagine that you buy a condo, house, or similar property in Hawaii, and then after the closing, discover that it has major defects--a leaky roof, broken pipes, or faulty air conditioning, for example. And imagine that the seller never told you about any of these issues before the sale. Perhaps the seller even advertised or told you that the house was in excellent condition.
Was the seller legally required to inform you about these defects? And does Hawaii law give you any recourse against a home seller in this situation?
Hawaii does indeed require that sellers of residential property make certain disclosures to buyers prior to the sale. If you have discovered a problem with the property, you need to determine whether the seller met his or her disclosure obligations.
Generally, Hawaii Rev. Stat. 508D provides that sellers of residential real property must give the buyer a disclosure statement, signed and dated within six months before or ten calendar days after the buyer's acceptance of a real estate purchase contract.
Within this statement, the seller is required to disclose all “material facts” concerning the property. “Material facts,” according to Hawaii's legislation, are “any fact, defect, or condition, past or present, that would be expected to measurably affect the value to a reasonable person of the residential real property being offered for sale.” In other words, the seller did not need to disclose every carpet stain or scratch on the wall; he or she merely needed to disclose conditions that are reasonably serious. Common sense ordinarily dictates what falls into that “material” category, though it's certainly the type of topic that gives rise to lawsuits.
What exactly does the disclosure form look like? The Hawaii Association of Realtors issues a standard form that is commonly used by sellers. You likely have a form like this in your files from the closing.
The four-page form asks the seller to consider different elements of the home. Questions are divided into Sections A-F, asking about various elements from the condition of the ceiling fan to that of the swimming pool. Most questions ask the seller to check “yes” or “no” if there is a problem with that particular area.
The closing is behind you, and you have discovered a defect. You believe that it's “material” in nature: important and expensive, an issue that lowers the value of the property. What can you do?
First, remember that the seller was required to disclose only defects about which he or she had actual knowledge. According to the statute, the seller “shall be under no obligation to engage the services of any person in the investigation, research, or preparation of the disclosure statement.” In other words, your seller had no obligation to hire an inspector to verify whether or not there are defects in your home, only to report on what he or she had learned by living there.
If the defect is significant enough that the seller likely knew about it prior to the sale, and still failed to disclose it, you might have a cause of action against the seller under the statute. Hawaii Rev. Stat. 508D-9 requires sellers to “prepare the disclosure statement in good faith and with due care.” The statute defines “good faith and with due care” as “honesty in fact in the investigation, research, and preparation of the disclosure statement.” While the statute does not specify a particular penalty, courts are likely to award you the cost of repairing the defective condition. This is particularly true if you can demonstrate that the seller intentionally lied or misrepresented the condition to you.
Beyond this statute, you might also have common law causes of action, particularly fraud and breach of contract, against your seller under Hawaii law.
Fraud becomes the basis of a lawsuit in cases where one party made a statement that was knowingly false in order to induce another party to take an action. Imagine that the seller told you that the roof had just been replaced and was now fully up to code. But in fact, the roof was old and leaky; the seller had no intention of fixing it before the sale. Obviously, the seller told you this so as to make you more likely to buy the home. This is fraud.
Similarly, you may have a breach of contract cause of action against the seller if the language of your purchase contract made certain guarantees. For example, your purchase contract might specifically state that all major appliances would be replaced prior to the sale. A seller who failed to do this has breached the contract. You would be entitled to damages in the amount of reasonable new appliances, which is precisely what you had bargained for in the contract.
Regardless, you should act quickly if you discover a defect in your home. Hawaii Rev. Stat. 508-D(17) creates a strict two-year statute of limitations on any actions against the seller from the date of the disclosure form’s transmission. As with all statutes of limitations, the Hawaii legislature hopes to create some certainty two years after the conclusion of a residential transaction. From your perspective, however, it means you should speak with a lawyer promptly after discovering a potential defect. You would not want your potential lawsuit to be barred by this limitations period.