Julie and Jeff Jones closed on their new Pennsylvania home on Wednesday. When they moved in a few days later, they noticed some water that had accumulated at the bottom of the basement stairs. The next day, there was even more water. They didn't remember the sellers having made any specific disclosures or notifications about water in the basement. Yet the type of problem makes them suspect that the sellers knew about it long ago, and didn't tell them. Do they have any legal remedy against the sellers?
The common law rule in Pennsylvania was "caveat emptor," or "buyer beware" for any purchases of real property — in other words, if the back step is broken, or the ceiling in the living room caves in right after closing the buyer takes care of the cost of repair. However, the Pennsylvania Legislature has placed limits on this rule, and required sellers to give buyers written notice of material defects with the property, as described in "Pennsylvania Home Sellers: Disclosures Required Under State Law."
Pennsylvania's statute does not make seller's liable for undisclosed defects in cases where the seller actually knew nothing about them. The statute extends this protection to sellers who reasonably believed a problem had been corrected. So, if the sellers in the example above hadn't known that their basement was leak-prone — hard to imagine, but perhaps possible if the sellers spent winters in Florida and the water dried up by spring — they wouldn't have been required to disclose the problem to the Joneses during the sale transaction.
A seller can, however, be held responsible for actively hiding any problems in the house. Thus, a seller who knows that the toilet in the upstairs bath is leaking should mark this on the seller's disclosure form. Similarly, if the seller is well aware that there is an open well pit in the far corner of the back yard, the seller needs to tell the buyer about it – or potentially face a lawsuit later.
Home buyers in Pennsylvania routinely make property defects claims against sellers on two grounds that aren't covered in the statute: fraud and negligent misrepresentation.
In a fraud action, the buyer must claim that the seller intentionally failed to tell the buyer about a problem. This failure can include taking active steps to hide the problem, such as installing new carpet in a musty, leaky basement, or simply painting a ceiling bright white to cover the evidence of water damage. The courts have allowed buyers, when they can show that this happened, to receive the costs of the repair from the sellers – and in some cases even reverse the sale of the house.
In a negligent misrepresentation action, the buyer needs to show that the seller should have known the defect existed or had not been repaired. For example, if the seller experienced a water back up several years ago and had it repaired, but failed to disclose that the problem had happened again, the buyer could potentially argue that the seller should have known the repair was not successful. The buyer could also accuse the seller of intentionally failing to tell the buyer about the problem.
The buyer may also have a remedy against the selling broker if the broker knew or should have known about the concealed defect. The broker is responsible for sharing only information within his or her actual knowledge, so you would need to have evidence that the broker knew about it to pursue a claim. (See "Home Sales in Pennsylvania: What the Listing Real Estate Broker Must Disclose About the House" for details.)
However, in one case where the seller started to tell the selling broker something, and she responded "the less I know the better," the broker was held partly responsible for the misrepresentation. (See Schwartz v. Rockey et al, 932 A.2d 885 (Pa. 2007).)
Home inspectors are not legally responsible for discovering latent or concealed defects. However, if a home inspector failed to find an obvious defect within the realm of his or her professional knowledge, the inspector may be held responsible for the resulting damages.
The Uniform Trade Practices and Consumer Protection Law protects people who purchase goods or property for personal or household use, including homes. If the person making the sale uses unlawful means to complete the sale, the buyer has a remedy under the UTPCPL. The Act itself describes the monetary remedy as the actual amount of damages and up to three times the amount of the damages – also known as treble damages.
If a Pennsylvania homebuyer can prove an intentional or fraudulent misrepresentation on the part of the seller or the selling broker, the buyer can ask for anything from the actual amount of the damage all the way up to three times the amount.
The first thing to do when something goes wrong with your house is to document it — that is, start gathering evidence in case you have to present it in court. Take a picture of the damage and write down the date and a description of the problem. You should also immediately take reasonable self-help steps, such as turning off the water if a pipe breaks or mopping up water if a sump pump fails.
After the immediate issue has been addressed, you should notify the buyer's broker. If you did not utilize a broker, contact the seller's broker. If no brokers were involved, you should notify the seller about the damage and ask whether the seller knew of the problem.
Depending on the seller's response, you will likely have an idea of whether or not the seller intentionally disclosed a defect. However, you probably will need to do some investigations on your own as to what the seller knew of and when. For example, you might hire an inspector to examine the problem and see when it likely arose and whether it shows evidence of previous repairs. You can also ask neighbors about whether, for example, they saw frequent plumbers' trucks at the property or were told about problems by the sellers.
If there was an intentional failure to disclose, the buyer should contact legal counsel regarding the next steps.