Your family may have searched for months before buying your home in the Tar Heel State: going to open houses, meetings with agents, and finally moving into what you thought was the perfect home. But you soon discover significant defects. Perhaps the foundation is in bad shape, moisture enters the roof or window frames during bad weather, or the sewer line is prone to clogging. You call in the experts, who tell you that it will cost tens of thousands of dollars to correct the problems.
If you discover undisclosed defects, you will surely feel angry and cheated. Did North Carolina law require that the home seller inform you of home defects? And are there any legal avenues by which to recover your damages?
In North Carolina, sellers of residential real estate are required to disclose known material defects with the property before they sell it. The goal, of course, is to protect unsuspecting buyers like yourself.
The Residential Property Disclosure Act, codified as North Carolina G.S. 47E, requires home sellers to complete a form—known as the Residential Property and Owners’ Association Disclosure Statement—identifying conditions and defects with the property. This law applies to any transfer of residential property (including leases with an option to purchase), whether or not a licensed real estate agent or broker is involved.
The statute says that real estate sellers must "disclose, in writing, to the buyer, agent and subagent, as applicable, all material defects of that property that are known at the time the property is offered for sale.” The law also requires sellers to “provide the buyer with any information on radon from tests or inspections in their possession, and notify the buyer of any known radon hazards.”
According to North Carolina G.S. 47E-5, the seller must give the disclosure “no later than the time the purchaser makes an offer to purchase, exchange, or option the property.” Thus, you should have received your disclosure form from the seller by the time you made your formal offer.
What, exactly, should you have received from your seller? Most likely, you received a four-page document created by the North Carolina Real Estate Commission, containing all of the necessary disclosure information. The seller should have answered the form’s many questions about various aspects of your home. These include basic information about the property’s title, as well as more detailed information about the condition of its floors, ceilings, pipes, and so on.
Remember, the seller was never required to hire a professional inspector before issuing you the disclosure form. Rather, he or she was “only obligated to disclose information about which [he or she has] actual knowledge.” Actual knowledge means that the seller must have actually possessed information about that particular condition.
The form you received should have also contained additional information that is a somewhat unique to North Carolina. North Carolina G.S. 47E-4.1 provides for a further disclosure relating to mineral, oil, and gas rights. The statute has a series of six questions for the seller. (These will not be relevant to many homebuyers).
With that background in mind, consider your legal strategy upon discovering undisclosed defects in your North Carolina home. Your first step should be to locate the disclosure form among the files from your closing. Next, you should see what information, if any, the seller disclosed in connection with the problems you are now experiencing.
If the seller did, in fact, disclose information about the relevant defects, and you chose (consciously or not) to ignore the information, you cannot now turn around and sue the seller. But if the seller was silent about an obvious or known defect, then you may be able to bring a cause of action under North Carolina G.S. 47E. Be sure to gather evidence of the seriousness of the defect--in particular, take photos before making any repairs--and keep good records about contractors and other professionals you bring in, and what they say about how long the problem may have existed.
Moreover, depending on the facts of your situation, you might also sue for fraud. Fraud is a cause of action under North Carolina 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 specifically that he had an engineer examine the structural integrity of the house just before the purchase contract would be signed, and that the structure was deemed to be sound. You later discovered that the structure was imperiled, and the seller never conducted this sort of engineering inspection. Clearly, this constitutes fraud, since the seller lied to you in order to induce you to buy his home.
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.
Discovering an undisclosed defect in your home is never a welcome experience. But you are fortunate to reside in North Carolina, which has fairly robust disclosure expectations of sellers. This legal backdrop may help you to recover for your damages and make the best of an unfortunate circumstance.