Rebounding from the horrors of Hurricane Katrina, Louisiana’s housing market is recovering reasonably well. If you just purchased a home there, you are likely expecting that the purchase will be an investment and will gain value over time. But what if, after moving in, you discover that the property isn’t worth as much as you thought? For example, imagine that you discover that the central air system doesn’t work, or that the basement has significant water damage. These problems were never disclosed by the seller, and will likely cost five figures to repair.
Under Louisiana law, was the seller required to tell you about such issues prior to the closing? And since the seller did not speak up, do you have any legal remedies to recover for your expenses or, in legal terminology, damages?
Fortunately, Louisiana has fairly robust regulations around mandatory seller disclosures for defects in residential real estate. Louisiana Revised Statutes § 9:3198 requires sellers to “complete a property disclosure document in a form prescribed by the Louisiana Real Estate Commission or a form that contains at least the minimum language prescribed by the commission.”
The overall purpose of the statute is to force home sellers to detail any material facts of which they are aware that negatively affect the house and property. This could cover a wide variety of concerns, ranging from the condition of the roof to the condition of the gas tank. Remember, though, the seller was not under any obligation to hire an engineer or home inspector prior to selling the home. There is no requirement that the disclosures be “verified” by an independent expert at the seller’s expense; the seller merely needed to disclose the defects within his or her actual knowledge. What did these aspects of the home include?
The Louisiana Real Estate Commission, a state agency charged with regulating the real estate industry, created a form containing extensive prompts for disclosure about various aspects of the home. The seller was required to check a box for “Yes,” “No,” or “No Knowledge” for most of the items.
For just a few examples of the types of matters addressed, Section 3 asks about the property’s “Structure” (such as roof, pool, windows, ceilings); Section 4 asks about the condition of the plumbing system; and Section 5 asks about the condition of the electrical system, including the type of air conditioning and heating units installed.
As per Louisiana Revised Statutes § 9:3198, the disclosure form also requires more specific information. For example, the seller needed to have informed you whether you would need to become a member of a homeowners’ association upon purchasing the property; whether an illegal laboratory for the production or manufacturing of methamphetamine was in operation on the property; and whether the property had been zoned “commercial” or “industrial.”
According to the statute, the seller should have given you the completed and signed property disclosure document no later than the time you made "an offer to purchase, exchange, or option the property" or exercised a lease option to purchase it.
What do you do if you discover a defect in your new home? First, review your files from the closing. Somewhere, you likely have the Louisiana disclosure form.
The timing of when you received the statement is important: If the seller tried to give it to you after you signed the purchase offer, but before the closing, Louisiana law allows you to terminate your contract or withdraw the offer within 72 hours (excluding federal and state holidays and weekends). The purpose of this “grace period” is to ensure that you carefully review the form and see whether it contains any surprises that you want to factor into your offer. If the seller reveals that the house’s structure is falling apart, you would surely pay much less for the property!
If you received the statement before the purchase contract is signed, but the seller simply never disclosed the issue that you are currently facing on the property (the more common situation), then you have a few options. Depending on the amount of the damages, it might make sense to invest in a consultation with a real estate attorney.
The attorney might suggest that you sue the seller for breach of the disclosure statute, seeking recovery of the costs to repair the property’s defective condition that should have been disclosed. In other words, if the basement was flooded and had extensive water damage, you could seek the amount of money that it took for you to remedy the condition.
Depending on the facts of your situation, the attorney might suggest other causes of action as well. For example, you might sue for fraud. Fraud is a cause of action under Louisiana law that arises 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 asbestos in the home had been abated, which was important to you because you have small children. You buy the home on the basis of that representation. However, you soon discover that it was a lie; there is still asbestos, and the seller made no efforts to abate it. 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 the flooring would be replaced in the kitchen before the closing. If the seller fails to do this, then the seller has breached the contract. By definition, you did not get what you paid for. You would be entitled to damages to cover the costs of upgrading the floors, which is precisely what you had bargained for in the contract.