There are few situations more frustrating than spending a significant amount to buy a home, only to discover, upon moving in, that the seller neglected to tell you about various issues and defects. Perhaps the pool drain is clogged; the yard has a dangerous sinkhole that needs to be filled; and the roof has a nasty leak. Such problems can cost many thousands of dollars to repair, and much aggravation.
Did the seller have an obligation to sell you about defects in the property before you bought the home? If so, what remedies does Tennessee law give to you as a buyer to recover?
Tennessee law (at Tenn. Code Ann. § 66-5-201 et seq.) covers disclosure requirements imposed on home sellers in the state. Sellers must provide buyers with a disclosure statement before they both sign the purchase contract. A disclosure statement is a short document, signed by the seller, that lists “any material defects known to the owner” about the property.
The disclosure statement must identify any material defects about which the seller has actual knowledge. Tennessee’s legislature provides a model form for this, within Tenn. Code Ann. § 66-5-202. The Tennessee Realtors Association has also created a similar seven-page form, which is available online. You should have received this form, or a similar-looking one, before signing your purchase contract.
Tenn. Code Ann. § 66-5-202 also requires certain specific disclosures to be set out in the purchase contract itself. The seller was required to disclose “the presence of any known exterior [water] well”; the results of any known “percolation test or soil absorption rate performed on the property”; the existence of a “sinkhole” on the property; and any known “groundwater erosion causing a surface subsidence of soil, sediment, or rock.”
If you find a defect in your new home, you should locate the purchase contract and disclosure form in your files. You’ll recall that the disclosure form contains a few dozen questions, answered with “Yes,” “No,” or “Unknown.” These questions concern various aspects of the home, ranging from the validity of the seller's legal title to the condition of the plumbing system.
While Tennessee does require the seller to give you an extensive disclosure form before the sale, the legislation does not provide a clear cause of action for the seller’s failure to do so. Indeed, the legislation contains a number of seller-friendly provisions that make it challenging for buyers like yourself to litigate.
For example, Tenn. Code Ann. § 66-5-202 requires that the seller’s disclosure form include a notice to prospective buyers that they may wish to obtain professional advice or inspections of the property. Thus, the seller will be able to argue that you were warned to hire your own independent inspector to perform an evaluation of the property.
Moreover, Tennessee law requires only that sellers disclose defects about which they have “actual knowledge” (a common provision in state disclosure laws). According to Tenn. Code Ann. § 66-5-201, a seller “shall not be required to undertake or provide any independent investigation or inspection of the property in order to make the disclosures.” In other words, the Tennessee home seller would not have been required to hire a pool engineer to make sure that the pool’s pumps and drains were working before submitting the disclosure to you. The seller merely needs to answer the questions on the disclosure form to the best of his or her personal knowledge.
In some ways, then, Tennessee’s disclosure law will not provide a silver bullet for you against the seller if the seller failed to advise you about a material defect in the home. Nevertheless, you may have a legal cause of action against the seller for breach of contract or fraud.
Fraud is a can be the basis of a lawsuit in cases where one party made a statement that was 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 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 speedily. You or your Tennessee-licensed 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 Tennessee’s laws are not incredibly buyer-friendly, but you may still be able to recover some monies from your seller.