Imagine that you have just bought a new house in New Mexico. You and your family move into the beautiful home in a carefully chosen neighborhood of Albuquerque. As you unpack upstairs, you notice that the faucets do not turn on. And then you realize that there is no running water at all on the second floor of the house. Suddenly, your new home in the Land of Enchantment does not seem so enchanting.
You will surely be angry. Did the seller know that there was no running water when he sold you the home? Was he required to disclose it under New Mexico law? And if he did disclose it, did you simply miss it? What legal remedies might you have against the seller to cover your costs in repairing the defect?
New Mexico has particular requirements for sellers to tell prospective buyers about defects with their home to buyers before the sale. These requirements are laid out in New Mexico Statutes § 47-13 et seq., also known as the Real Estate Disclosure Act.
Generally, home sellers must provide buyers with a written disclosure of all material defects in their property about which they have actual knowledge. These disclosures should be given to the buyer before the purchase contract is signed. For example, a seller who knows that the air conditioner is not working, or that the basement has serious mold, must disclosed these facts in writing. You should have received such a form from the seller (most likely via the seller’s real estate agent).
Moreover, New Mexico requires that the seller also disclose to you information about your future tax burdens as the owner of the property. According to New Mexico Statutes § 47-13-4, the seller must “(1) request from the county assessor the estimated amount of property tax levy with respect to the property and… specify the listed price as the value of the property to be used in the estimate” and “(2) provide a copy of the assessor’s response… in writing to the prospective buyer or the buyer’s broker.” The statute also includes information about how the county assessor (sometimes referred to as the county clerk) must calculate the property taxes.
The purpose of both the defect disclosure requirements and the tax disclosure requirements (which are somewhat unique to New Mexico) is that you would not want to be surprised after moving into the new home, whether by a broken air conditioner, or by a huge monthly tax bill.
So, if you do have a nasty surprise after moving into your New Mexico home, what can you do? First, take notice that the bottom of the disclosure form contains important language. It states in big, bold letters that: “This is not a contract.” In other words, the seller is not guaranteeing anything, but is merely required to disclose defects with the property within his or her “actual knowledge.” If the seller does not know about a particular problem, he or she has no duty to hire an inspector before checking the “no” box on the disclosure form.
The bottom of the disclosure form also contains a second piece of important language: “The law does not protect a Seller who makes an intentional misrepresentation.” In other words, if the seller knows that the air conditioner does not work, but checks the “no” box on the form anyway without mentioning anything about the air conditioner on the disclosure, this constitutes fraud. In legal terms, fraud results from one party making a statement that is knowingly false in order to induce another party to take an action, in this case to buy a defective piece of property.
Moreover, you may have a breach of contract cause of action against the seller if the language of your purchase contract made specific promises or representation (beyond whatever is stated in the disclosure form). For example, if the purchase contract promised that the air conditioning would be in good working order, but it was not, this would constitute a breach.
If you discover a defect of this sort in your New Mexico property, you should immediately write to the seller, broker, or both, stating the problem and outlining your damages. Demand letters can sometimes make a potential defendant willing to settle a dispute early on. Litigation can be costly, and you should always weigh the value of a potential recovery against the costs of a lawsuit. For example, if the refrigerator does not work, this might cost a few hundred dollars to repair. But a lawsuit against the seller for fraud or breach of contract might cost far more.