Selling your Minnesota home can be a lengthy and challenging process. While the housing market has started to rebound from the Great Recession, it remains weak in many parts of the state. State law makes selling your home even more challenging in at least one respect: mandatory disclosure of defects. In Minnesota, like in many states, sellers are required to reveal various problems that could affect the property's value or desirability. For example, a seller cannot fraudulently conceal major physical defects, such as a shoddy roof or a structural weakness in the foundation. If you're selling your Minnesota home, what must you disclose, and when?
Disclosure Law in Minnesota for Home Sales
Before you begin the process of selling your home, you should read Minnesota Statutes § 513.55, which broadly covers disclosure statements. The law is fairly short, stating: “Before signing an agreement to sell or transfer residential real property, the seller shall make a written disclosure to the prospective buyer. The disclosure must include all material facts of which the seller is aware that could adversely and significantly affect: (1) an ordinary buyer's use and enjoyment of the property; or (2) any intended use of the property of which the seller is aware.” Further, the law states that the disclosure “must be made in good faith and based upon the best of the seller's knowledge at the time of the disclosure.”
Essentially, this requires that the seller of a home must give a written disclosure—i.e., not oral—detailing any material facts of which the seller is aware that negatively affect the property. As we will see, this could cover a wide variety of defects in your home, ranging from the condition of the HVAC to the structural integrity of the foundation.
The additional requirement of “good faith” written into the legislation signifies the legislatures intent to prevent sellers from engaging in unscrupulous conduct or misstatements. This means that you should not, for example, use sneaky wording to cover up the existence of a defect. These sorts of tactics could expose you to liability if and when they are later discovered by the buyer.
The Minnesota Bar Association has created a standard Disclosure Form—nine pages long—that you, as a home seller, must fill out. You'll see that you must certify that the information presented is accurate as of the date of the form. Moreover, you must disclose whether you possess any contradictory inspection or engineering reports that show defects with the home.
The Disclosure Form gives you an open-ended prompt to disclose: “All material facts of which the seller is aware that could adversely and significantly affect: (1) an ordinary buyer's use and enjoyment of the property; or, (2) any intended use of the property of which the seller is aware.”
The Disclosure Form then asks you a couple dozen specific questions. For example, you must state the year you purchased the house; whether pets have lived there; and whether there have been any structural replacements. You must further answer specific questions about nearly every specific aspect of the home, from the tiling to the air conditioning to the roofing.
Indeed, Minnesota’s Disclosure Form is unique in its level of specificity; some states do not require so many specific questions, but rather give more open-ended opportunities for disclosure.
Finally, the Disclosure Form asks for various environmental disclosures. For example, the home seller must state whether there is known asbestos in the home, as well as any water or air contamination.
You won't be asked about everything. For example, the Minnesota disclosure form explicitly allows you to remain quiet about whether the property was occupied by someone who was or was suspected to have been infected with the HIV virus or diagnosed with AIDS; that it was the site of a suicide, accidental death, natural death, or perceived paranormal activity; that it is in a neighborhood containing any adult family home, community based residential facility, or nursing home; or that a registered sex offender lives in the neighborhood.
These exclusions are, in most cases, meant to either protect privacy or avoid rumors. Regardless, buyers could easily find information about some of these details on the Internet, along with databases showing the locations of sex offenders. Therefore, you should be prepared to answer (or explain that you cannot answer) questions about these issues, if they apply to your property or neighborhood, regardless of whether they would appear on a disclosure form.
You may think to yourself: Sure, Minnesota law requires that I fill out this form and give it to a potential buyer, but why should I be entirely honest? Isn't it in my best interests to make any defects sound minimal, or hide them entirely?
In the short term, this strategy may result in a quicker sale of your home. But in the longer term, you could expose yourself to buyer anger if the same issues turn up in an inspection report, or to later legal liability if the buyer finds problems with the home and realizes that you were not entirely honest. A seller who fails to fully and honestly complete the Disclosure Form faces legal consequences.
For example, imagine that you sell your Minneapolis townhouse to a young family. On your Disclosure Form, you claim that there is no issue with the HVAC system. Two months after closing, the buyer tries to turn on the air conditioner and it fails to work. When he calls an electrician, the electrician tells him that there was clearly a great deal of work done on the HVAC system over the past few years, but that now it needs a full replacement.
The buyer will not be pleased. He purchased the home with the belief that the HVAC system was working. He may seek reimbursement from you for the costs of repair.
Indeed, Minnesota law specifically allows the buyer to sue the seller for any misrepresentation or omission from the Disclosure: “A seller who fails to make a disclosure as required by [the statute] and was aware of material facts pertaining to the real property is liable to the prospective buyer. A person injured by a violation of this section may bring a civil action and recover damages and receive other equitable relief as determined by the court." The buyer would have two years after the closing in which to take such action.
Nevertheless, notice that the form doesn't require you to disclose every last defect found within the house. For starters, not every fact will be considered "material" enough to affect the buyer's use or enjoyment of the property. So you can safely omit small issues, like faded drapery or scratches on the floors.
Moreover, you are required to disclose only items that you knew about when making the disclosure. You are not required to hire inspectors to check every last inch of the home for defects. Indeed, if you only lived in the home for a short amount of time, it is perfectly plausible that you simply would not know every issue with the house.
In short, honesty is the best policy. Litigation after the closing would be costly and time-consuming; you will want the transaction behind you. While there is no need to hire inspectors to expose every flaw in the home, or reveal minor issues, answering the questions on the disclosure form honestly will lead to smoother negotiations with the buyer and greater peace of mind in later years.