If you've just purchased a home in Montana and moved into it, you don't want to be surprised by revelations about its physical condition. Perhaps you are only now discovering that the pool heater is busted, the stairs are creaky, or the boiler won’t turn on. These problems were never mentioned by the seller, and will now cost thousands of dollars to repair. Did the seller have a legal obligation to tell you about such defects before you bought your Montana home? And can you sue the seller for this failure to disclose material home defects?
When you realize that your new home apparently contains undisclosed defects, you will first want to understand whether the seller met his or her disclosure obligations under Montana law.
Unfortunately, Montana’s regulations for sellers are not particularly helpful to your cause. Most states have legislation that would require a home seller to give a formal written disclosure report to potential buyers. Such reports typically identify any material defects in the property, from a failing refrigerator to a leak in the attic.
In the great state of Montana, by contrast, no law requires home sellers to disclose these sorts of defects to prospective buyers. Montana courts enforce what are known as caveat emptor clauses in purchase contracts. Under the doctrine of caveat emptor (“let the buyer beware”), buyers are not owed compensation for home defects found after the purchase unless the seller did something to actively prevent the buyer from inspecting the property to find all of the defects.
One exception, however, is a federal law that would require the seller to disclose to you information about the presence of certain lead-based paints and other materials if the home was built before 1978. See Seller Responsibility to Disclose Lead-Based Paint Hazards for more information. Beyond this federal requirement, however, Montana does not impose additional obligations.
This equation changes somewhat, however, if the seller used a real estate agent to assist with the transaction. (Using a real estate agent is common, but by no means required.) In the event that a real estate agent was used, that agent may have needed to make certain disclosures to you based upon professional regulations and state law. M.C.A. § 37-51-313 requires that, “A seller agent is obligated to the buyer to… disclose to a buyer or the buyer agent any adverse material facts that concern the property and that are known to the seller agent….”
Montana defines an “adverse material fact” as one that should be recognized by a broker or salesperson as significant enough to affect a person’s decision to enter into a contract to buy or sell the property and materially affects its value, or structural integrity, or presents a documented health risk to occupants.
In short, if the seller asked the real estate agent to lie for him or her, the agent cannot do so without risking his or her license. Moreover, if the agent became aware of a problem with the home in some other way—through visual inspection or an engineer’s report, for example—that agent would have a legal obligation, under M.C.A. § 37-51-313, to report this fact to you as a potential buyer.
This requirement was obviously of limited benefit to you, however, given that the agent never lived in the property and wouldn't know nearly as much about it as the seller. Moreover, a Montana real estate agent is “not required to inspect the property or verify any statements made by the seller.” Essentially, the real estate agent was merely required to tell you about any obvious defects with the home (ones you could easily have noticed yourself) or defects that the seller explicitly mentioned.
Given Montana’s limited regulations around disclosure, what remedies might you have if you discover a defect in the home after the sale?
First, if the seller used a real estate agent and you believe that the agent expressly lied to you, or purposely failed to disclose a material defect that he or she was aware of, you may be able to sue the agent. You could also report that real estate agent to Montana’s Board of Realty Regulation, which oversees licensed agents—a prospect which might by itself convince an agent to settle your claims.
Second, regardless of whether a real estate agent was involved, a seller can face legal liability for lying to you directly about the condition of the property. If you believe that the seller intentionally lied, you could sue for fraud. Fraud means that one party made a statement that was knowingly false to induce another party to take an action. Imagine, for example, that the seller told you that there was no asbestos in the home to reassure you that the property was safe for your small children. In fact, he told you he had it removed. However, the seller knew that this was not true. This would constitute fraud.
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 appliances 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.
If you discover defects in your new Montana 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. Despite the lack of extensive disclosure obligations in Montana, sellers can still face liability in certain situations.