If you're selling your home in the Nutmeg State, you'll need to be mindful of Connecticut's disclosure requirements. Sellers of residential property are required by state law to disclose certain defects with their home that could impair its value. These disclosures must be made before any purchase contract is signed.
Connecticut General Statutes § 20-327b requires that residential sellers make certain disclosures to a potential buyer. The statute applies regardless of whether a licensed salesperson or broker is involved in the transaction. Connecticut's Department of Consumer Protection—the state agency charged with licensing businesses and regulating various commercial activities—promulgates a residential property condition disclosure report form that sellers must use to comply with the law.
As you will see, the form requires you to answer many pages' worth of questions. These range from basic informational inquiries—how long have you lived in the home, how old it is, and so forth—to questions about the condition of various specific aspects of the home, indoors and outdoors. For example, you are required to state whether you have any knowledge of problems with the heating system, plumbing system, and electrical systems. You must also explain any problems with the roof, patio, and other structural elements.
The form gives you additional space to explain any of your responses to those questions in greater detail, and encourages you to attach pages if necessary.
You will be required to sign the bottom of the form, which reminds you: "To the extent of the Seller(s) knowledge as a property owner, the Seller acknowledges that the information contained above is true and accurate for those areas of the property listed. In the event a real estate broker or salesperson is utilized, the Seller authorizes the broker or salesperson to provide the above information to prospective buyers, selling agents or buyer's agents."
The buyer will also be required to sign to indicate that he or she received the form.
You will notice the requirement built into the above language for you to disclose issues with the property "[t]o the extent of the Seller(s)' knowledge." What, exactly, does this mean?
Beyond checking "Yes" or "No", you may check "Unknown," if you have no actual knowledge of problems affecting the area in question. This is an important distinction. As the form itself states, the statute requires disclosure only of defects about which you know. In other words, you are under no affirmative duty to hire a mechanical engineer to ensure that your sewage system is working correctly before submitting the form to a potential buyer.
If you do not know about a problem, you do not need to investigate that area of the property prior to sale. That burden is on the buyer.
Indeed, the form goes through pains to remind the buyer of that obligation. Above the buyer's signature line, the form emphasizes: "The buyer is urged to carefully inspect the property and, if desired, to have the property inspected by an expert. The buyer understands that there are areas of the property for which the seller has no knowledge and this disclosure statement does not encompass those areas. The buyer also acknowledges that the buyer has read and received a signed copy of this statement from the seller or seller's agent."
Needless to say, this language is beneficial to you as a seller. It insulates you from liability for defects that might exist, but about which you have no actual knowledge.
The only penalty spelled out in the disclosure form is a $500 violation—payable to the buyer at closing—if you fail to submit the form. Indeed, some real estate experts advise sellers in states with rules like Connecticut's to simply take the small monetary hit and avoid the disclosure form altogether. After all, making disclosures might draw buyers' attention to negative aspects of your home, and if you miss something, it could lead to a lawsuit down the road.
Nevertheless, there are benefits to filling out the disclosure form. Not only is Connecticut's form relatively short compared to those in other states, but disclosure can also put a potential buyer at ease.
When making your disclosures, avoid any instinct to minimize or ignore known defects. While such a strategy could hasten the sale of your home in the short term, it could cause problems in the longer term if the buyers conduct an inspection and find the problems themselves. Indeed, such a strategy could also lead to later legal liability if the buyer discovers the problems after the closing.
For example, imagine that you sell your Greenwich, Connecticut home. On your disclosure form, you claim that there is no issue with the electric system. After closing, the buyer tries to turn on the lights and they fail to work. Any claim that you "didn't know" about the broken electrical system would be, at best, difficult to believe.
This creates a risk that the buyer sues you for breach of contract or fraud. Fraud is often defined as an intentional misrepresentation of a material fact made with knowledge of its falsity, and made with the specific purpose of inducing another person to act, resulting in injury to that person. Your misrepresentation—that you did not know about a very obvious defect—could expose you to liability. At a minimum, it could entrap you in costly and time-consuming litigation when you would like the thoughts of your old home to be behind you.