Imagine that you’ve just purchased a new home in the Pine Tree State. As Maine’s chilly fall turns to an icy winter, you go to turn on the heat. But the heating system does not live up to its name. You hear a whirring noise, but no hot air. A repairperson tells you that the system probably hasn’t worked in years, and will cost many thousands of dollars to repair.
Did the seller have an obligation to disclose this problem to you before the sale? If so, does Maine law allow you recover any money from the seller?
If you find a defect in your new home, the first question is whether or not the seller knew about it and if so, had any obligation to tell you about it before the sale. The latter answer varies from one state to the next.
In Maine, a home seller usually does have such an affirmative obligation. Maine Rev. Stat. Title 33, § 173 requires the seller of residential real property to "provide to the purchaser a property disclosure statement.”
Maine’s law specifically enumerates the issues with the home that the seller must disclose. These include issues concerning: (i) the water supply system; (ii) the insulation; (iii) the heating system; (iv) the waste disposal system; (v) hazardous materials (like asbestos, radon, or lead-based paint) present in the property; and (vi) any other known defects with the home (a catchall category).
Maine’s legislature does not provide an actual form for use by sellers in making their disclosures (as some states' legislatures have), but the Maine Association of Realtors has created a sample form that contains all of the legally required information that the seller must give the buyer. As for timing, the seller must “deliver or cause to be delivered the property disclosure statement" to you no later when you make your purchase offer. (See Maine Rev. Stat. Title 33, § 174.)
Sellers cannot simply add an “as is” clause to the purchase contract in order to escape their disclosure responsibilities under this statute. However, they are not required to hire a professional inspector or to verify the information disclosed in their form. Rather, they are required to disclose only defects that they knew about when making the disclosure.
How can you use Maine's legislation to your advantage, if you discover a defect after signing the purchase contract? First, consider whether and when you were given the disclosure form, as required by the statute. According to Maine Rev. Stat. Title 33, § 174, if the property disclosure statement is delivered to you after you made an offer, you may terminate any resulting real estate contract up to 72 hours after receiving it.
Unfortunately, Maine’s legislation includes a good amount of language that is favorable to the seller. Under Maine Rev. Stat. Title 33, § 177, the seller cannot be held liable for any "error, inaccuracy or omission of any information” in the disclosure form as long as the it wasn't "within the actual knowledge of the seller or was based on information provided by a public agency or by another person with a professional license or special knowledge who provided a written or oral report or opinion that the seller reasonably believed to be correct…”
In layman’s terms, this means that you can sue your seller for mistakes or omissions in the disclosure report only if your seller knew that the statements were false when he made them.
In our hypothetical above, imagine that you called a repairperson as soon as you realized that the heat in your Maine home was busted. He tells you the heat pump probably hasn’t worked for years, and is in desperate need of replacement. And yet, your seller indicated on the disclosure form that the HVAC was in good working order. This would seem to be strong evidence that the seller intentionally lied to you, especially given that the seller would know that a working heating system would likely influence your purchase decision in a chilly state like Maine.
If you believe that the seller intentionally lied, you may have a legal cause of action not only for nondisclosure, but for fraud. Fraud means that one party made a statement that was knowingly false to induce another party to take an action. Here, for example, the seller lied on the disclosure form in order to induce you to buy the house. Had you known that the HVAC was broken, you might have declined to buy the house, or might have at least offered less money.
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 certain windows would be upgraded before the sale. If this turns out not to have been done, the seller may be in breach. It is also possible that the contract included language that guaranteed that certain aspects of the home would be in good working order (such as the heat).
In sum, Maine’s legislature requires that sellers make certain disclosures before the purchase contract is signed, and creates liability for sellers who intentionally lie to you. If you discover defects in your new home, act quickly. You or your attorney should write to the seller, agent, or both, stating the problem and outlining your costs. Demand letters can sometimes make a potential defendant willing to settle a dispute before you need to file litigation.