Imagine that you have just closed on a new home in North Dakota. You and your family searched diligently, going on countless open houses, and finally found the perfect spot. You negotiated the price, signed the purchase contract, and moved in. Your joy quickly turns to dismay, however, when you realize that the sewage pipes in the basement are corroded and leaking, there's mold throughout the walls, and moisture is seeping in around the upstairs windows. All of this will cost you many thousands of dollars to repair.
You never saw these problems before signing the purchase contract, and your seller never told you about them. Did North Dakota law require the seller to disclose these defects to you? And will North Dakota law allow you to seek money damages for the costs of repair?
While most states have passed legislation that would require a home seller to give a written disclosure report to potential buyers, North Dakota has not. There is no law in North Dakota requiring a seller of residential real estate to disclose known material defects with the property before selling it. Instead, the state places the burden on buyers like you to conduct a thorough inspection; usually by hiring a professional inspector at your own expense to evaluate the home’s condition.
North Dakota does, at least, have some regulation for sales in which real estate agents were involved. The North Dakota Real Estate Commission regulates the licensing of agents throughout the state. Section 43-23-12.1(2) of the License Law requires that, in sales where the buyer isn't represented by a real estate brokerage firm, the seller’s real estate agent owes the following legal duties: "to perform customary acts typically performed by real estate licensees in assisting a transaction to the transaction's closing or conclusion if these acts are to assist the customer for which the services are directly provided; to perform these acts with honesty and good faith; and to disclose to the customer any adverse material facts actually known by the licensee which pertain to the title of the real property, the physical condition of the real property, and defects in the real property.”
That provision is somewhat helpful to you as a buyer, but only if didn't have your own real estate agent. If that was the case, the seller’s real estate agent had at least some minimal professional duties and responsibilities, and should have told you if he or she was aware of broken pipes, mold, and so on.
However, these disclosures nay not have been especially helpful to you. First, the agent has no duty to conduct an inspection of the premises--much less force the seller to do so--to verify the condition of the house. Second, the statute does not specifically state that disclosures must be in writing, which is somewhat unusual, and could come back to haunt you if the seller’s agent claims that you were told about a condition prior to the sale.
Clearly, North Dakota’s minimal disclosure regulation is not buyer-friendly. This leaves you with the question: How can you possibly recover against a seller for undisclosed defects that will cost you thousands--if not tens of thousands--of dollars to repair? The unfortunate answer is that you may not necessarily be able to recover. Nevertheless, there are some legal strategies that you may consider.
First, consider whether the seller used a real estate agent and whether that agent lied to you during the course of the transaction. If so, Section 43-23-12.1(2) of the License Law will offer some assistance. The North Dakota Real Estate Commission is charged with ensuring that agents maintain high standards of honesty in dealing with consumers. If a buyer gets hurt by a real estate agent’s failure to disclose a material fact about the property, that agent runs the risk of being punished by the Commission, for example by having his or her license suspended or revoked. As a buyer, you may have some leverage to ask the seller’s agent for reimbursement for your damages (such as the cost of correcting the issue at the heart of the misrepresentation). If the agent refuses, you or your attorney might report the agent for unprofessional conduct.
Second, you may have a legal cause of action against the seller for breach of contract or fraud, notwithstanding North Dakota’s lack of general disclosure legislation. Fraud is a common law cause of action recognized in North Dakota and elsewhere that results from one party making a statement that is knowingly false to induce another party to take an action. Imagine that the seller told you that he would have all mold removed before you moved into the home. But upon moving in, you discover that he never did so. Clearly, the seller made a knowingly false statement to induce you to buy the home.
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 furniture would be included, or certain windows upgraded before the sale. If this turns out not to be true, the seller may be in breach.
If you find these sorts of defects in your home, be sure to act with alacrity. 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 eager to settle a dispute before it erupts into a full-blown lawsuit. If the amount of your damages is significant, consider a consultation with a real estate attorney. Often, demand letters will be taken more seriously when they arrive on law firm letterhead, since it shows the potential defendant that you are strongly considering legal recourse. It is true that North Dakota’s laws are not incredibly buyer-friendly, but you may still be able to recover some monies from your seller.