Imagine that you purchase a home in Bethesda, Maryland for your family. After a long negotiation process, you come to terms with the seller and move into the home. At first, everything is perfect. A few weeks later, however, there’s a big storm, and the basement is flooded. You hire an engineer to come and inspect, who tells you that the poor sealing of the basement is probably a long-existing condition. You're surprised, because you don't remember the seller ever telling you about this. And now, you’re stuck with the price tag for the repair work.
What obligations does a home seller in Maryland have to make disclosures to buyers, and what remedies does a buyer have if the seller fails to live up to those obligations?
Maryland law requires sellers to make certain explicit disclosures of home defects to potential buyers, underMaryland Real Property Section 10-702. The seller of residential real estate is required to complete a form—known as the Residential Property Disclosure and Disclaimer Statement—disclosing conditions and defects with the property, and to provide copies of this to potential buyers. The precise format of the Statement can vary, but you can view samples online.
In reality, these are actually two different statements from which the seller can choose: a disclosure statement or a disclaimer statement.
The disclosure statement gives the seller the chance to disclose his or her knowledge about a variety of aspects of the home. Why would a seller intentionally disclose negative facts about the property? Disclosing all known defects would prevent the buyer from succeeding on a claim of fraud. After all, if the seller tells you that the furnace is broken, you can hardly sue after the fact and claim that you purchased the house on the basis of it having a working furnace.
The disclaimer statement, by contrast, gives the seller the ability to disclaim any warranties as to the conditions of the home, noting that “the purchaser will be receiving the real property 'as is' with all defects which may exist, except as otherwise provided in the real estate contract of sale.” Issuing such a disclaimer may scare off potential buyers, who will then be on notice that there is likely to be some substantial issues with the home. Not surprisingly, this could result in a lower purchase price. However, it saves the seller the trouble of having to make elaborate, detailed disclosures and puts the burden more fully on the buyer to perform inspections.
Note that a disclaimer statement is much like an "as is" clause in a home sale contract, except that a buyer cannot argue that the clause was "hidden," since the disclaimer form is signed by both the buyer and seller of the home.
Be sure to thoroughly review the form that your home seller gave you before concluding that a particular defect was not disclosed.
If you discover a significant defect with your Maryland home following the closing, and your seller failed to disclose it before that date, you might be able to seek recovery from the seller in court. Most likely these claims would be filed with the Maryland Circuit Court in your geographic area.
Your causes of action might include, for example, breach of contract, breach of the duty of good faith, and potentially fraud. Maryland sellers can also be held liable for failing to disclose a material defect. For example, if a seller knew that whenever it rains, the basement quickly floods, but failed to disclose this information, the buyer who discovers this can potentially sue.
For the buyer, the legal challenge will be showing that the seller in fact knew about the existence of the defect. A major defect like flooding of the basement might be relatively easy to show the seller's prior knowledge of, based on evidence of past flooding, records from repair people who visited the house at the request of the previous owner, and so on.
A more minor or hidden defect, like mold behind the sheet rock, or leaking sewer pipes, might be more difficult to prove the seller's knowledge of.
Whatever the situation, be sure to take photographs and gather any relevant forms of evidence as soon as possible. These will help a lawyer evaluate the strength of your case and may ultimately serve as evidence in court.