Rhode Island may be the smallest state in the Union, but it's still home to more than one million people. If you purchase a home there, your expectation is that the home will be worth its purchase price—indeed, your hope is that it will appreciate in value over time. But what happens if you discover big problems with the house after you move in? For example, imagine that you try to turn on the heat in the first cold New England winter, and you feel only cold air. Or imagine that you discover that your porch is caving in because of a termite infestation. The seller obviously knew about these issues, and yet never advised you of them before the sale. Does Rhode Island law give you any recourse against the seller to recover the value of these defects?
The first question upon discovering a surprise defect in your Rhode Island home is whether or not the seller had an affirmative obligation to tell you about it prior to the sale. Rhode Island Code § 5-20.8-2, which generally governs disclosures in residential home sales, provides: “As soon as practicable, but in any event no later than prior to signing any agreement to transfer real estate, the seller of the real estate shall deliver a written disclosure to the buyer and to each agent with whom the seller knows he or she or the buyer has dealt in connection with the real estate.” This disclosure “shall state all deficient conditions of which the seller has actual knowledge.”
In other words, the seller was supposed to have given you a “written disclosure” before you signed the purchase contract. That form should have come from the Rhode Island Real Estate Commission (part of the state’s Department of Business Regulation).
Check your records to see whether you received this form (or a similar form) from the seller or the seller’s real estate agent or attorney.The form covers a series of specific facts about the home—for example, its age, the seller’s length of occupancy, any specific local taxes or assessments, and the presence of any hazardous materials (such as lead paint or asbestos). It lists practically every element of a property, in 91 separate categories, from the condition of the chimney to the basement. For each element, the seller was required to check a box indicating whether he or she was aware of any “defects/malfunctions.”
Unfortunately, the form also reminds you in bold letters that: "This is not a warranty by the seller that no other defective conditions exist, which there may or may not be. . . . The buyer is advised not to rely solely upon the representation of the seller made in this disclosure, but to conduct any inspections or investigations which the buyer deems to be necessary to protect his or her best interest." Indeed, the statute specifically says: “Nothing contained in this section shall be construed to impose an affirmative duty on the seller to conduct inspections as to the condition of this real estate.”
In short, the seller was required to disclose to you only those defects that were within his or her actual knowledge. The seller has no duty, for example, to hire a certified Rhode Island engineer to examine the home before selling it to you.
With these disclosure regulations in mind, what can you do if you discover a nasty surprise in your Rhode Island home?
First, it is important when you discover the defect. If you discover the defect after you sign the purchase contract, but before you actually close on the sale, the statute allows you to either: (1) Terminate the contract and receive a refund of any monies paid; or (2) Allow seller the opportunity to cure such deficient condition.
If you discover the defect only after closing, however, your options are more limited. Rhode Island Code § 5-20.8-9is clear that “Neither the seller nor agent is liable for any error, inaccuracy, or omission of any information delivered pursuant to this chapter if the error, inaccuracy, or omission was not within the personal knowledge of the seller or agent….” In other words, unless the seller knew about a defect with the home and purposefully failed to disclose it on the form, you will be unlikely to recover damages in court.
However, if the defect is significant—for example, the heating system does not turn on at all—then you may be able to establish that the seller purposefully left that little detail off the disclosure form. (In chilly Rhode Island, any homeowner would likely realize this!). In that case, you might have a legal cause of action against the seller for nondisclosure. The seller failed to follow the law, and you can sue on that basis alone.
You might also be able to sue for fraud. Fraud is a common law cause of action that results from one party making a statement that is knowingly false to induce a party to take an action.
You may also 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 all major appliances are in good working order at the time of the sale. If the seller makes that promise in the contract, but it turns out that one or more of the major appliances are busted, the seller may be in breach.
Act diligently when you find a defect in your home following the purchase. There are many reasons for this. The seller might be moving away—out of Rhode Island or even out of the United States. The memories of others whom you might want to call upon to provide statements or testimony are short. (For example, you might want to call upon a repairperson who examined the defective heater when the former owner lived there.) Also, you would not want to miss a statute of limitations period (deadlines by which lawsuits of certain types must be filed).
Immediately write to the seller, real estate broker, or both, stating the problem and outline 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. The longer you delay in pursuing your claim, the lower your chance of recovery.