The Legislature Volleys Back….

Recently, I wrote about new case law in Washington that was making it more difficult for buyers of real property to make post-closing claims against the seller for property condition related matters. The Washington legislature has just amended the state’s residential property condition disclosure law to put additional burdens on sellers and will soon require a disclosure form when “unimproved

24 thoughts on “The Legislature Volleys Back….

  1. Thanks for the information Russ.

    I’ll second the importance of agents ordering pre-liminary title report the day of taking the listing. It helps to avoid the situation that we encountered several months ago when the owner of record did not match the owner on the purchase and sale agreement. Awkard to say the least for the listing agent and their broker. In the end it all worked out.

  2. Russ, do sellers have much of an out if they mark “n/a” or “unsure” on the form (sorry, I can’t remember what the specific term on the form is…I sound like a Seller!).

  3. Thank you, Russ. Great information and insights. The environmental area might be one of the biggest areas of concerns in rural areas. Seller will have to understand the issues. We’ll see how it plays out…… Looks like we’ll have a new series of training sessions coming up!

  4. Rhonda

    Form 17 can be the basis of a fraud claim. If the seller marks “Don’t Know” but really DOES know, that will amount to a misrepresentation. The key question is whether the buyer would be able to prove all of the other elements of a fraud claim including the fact that they reasonably relied on the misrep.


  5. I’m not sure if I agree with your title, Russ. This act, while certainly helpful to buyers, does not do anything to address the disadvantages created by the Alejandre case. Indeed, the act was approved by the Senate just nine days after the Court issued the decision. Accordingly, the act was most of the way through the legislative process before the case was decided.

    Hopefully, the legislature really does “volley back” after the Alejandre case. While a three day right of rescission beats a poke in the eye, buyers remain at a disadvantage after closing. To prevail on a fraud claim, the buyer must prove the nine elements by “clear and convincing” evidence, a burden of proof greater than the typical “preponderance of evidence” standard. Moreover, the Alejandre Court’s discussion of the buyer’s ability to negotiate warranties and “allocate risk” has little basis in the realities of a typical transaction. A legislative remedy could provide buyers with a reasonable and approprriate mechanism by which they could more likely recover from a dishonest seller.

  6. Craig

    I agree. I guess in tennis lingo, it was a weak volley where the savvy seller can still slam it in for the kill shot.

    I believe the law is where it should be. Seller’s must disclose what they know and not lie nor conceal defects. Buyer’s must exercise due diligence and thoroughly investigate the property and its title. In the end, the market conditions will dictate what level of additional protections via warranties that the buyer can extract from the seller.

    This will make the job of the agent to actually “negotiate” terms of the sale that much difficult.


  7. Russ:

    But is it reasonable to expect agents to have the knowledge necessary to adequately negotiate warranties or other methods of allocating the risks associated with potential defects? And wouldn’t such negotiation, at least arguably, run afoul of the limits created by Cultum v. Heritage House?

    Furthermore, while I can appreciate the position that the market should sort out the protections to which buyer’s are entitled, that position is not consistent with the realities of the modern economy. Government regulation (whether directly or indirectly, as through the Consumer Protection Act) is a fact of life, largely to protect buyers and consumers from harms that they would otherwise suffer if we were to rely solely on “market conditions” for their protection. I believe that buyers should be afforded greater protection against seller deception or dishonesty — perhaps a new cause of action arising out of the Seller Disclosure Statement where the buyer need only prove by a preponderance of the evidence that the seller was dishonest.

  8. What if the seller did a patch job on the roof, and didn’t reveal that the roof had ever leaked, BUT the inspector found that leak and revealed it to the buyer, and told the buyer the house needed a new roof.

    Would the latter negate the buyer’s recourse on the former? If the due diligence revealed what the seller did not, is the issue whether or not the buyer knew vs. who told him?

  9. Craig

    The Consumer Protection Act (and most other government regulatory schemes) are typically designed to protect consumers from businesses. Not consumer (private buyer) from consumer (private seller). Common law contract and tort law have historically been the basis of “regulation” between private buyers and private sellers. I too question the ability of some agents to have the understanding to effectively negotiate warranties. They will need to be able to explain what they mean, their scope and the impact they will have on either the buyer or the seller. Will that go afoul of Heritage House? Maybe the letter of Heritage House but not the spirit. I think good agents can learn this stuff to be effective.


  10. Russ — Good point about the CPA, but certainly common law claims can be modified to suit the needs of the modern society. For example, medical malpractice claims, although arising out of the common law, are governed by statute. I think this is just such a situation. After all, what motivation will brokers and agents have to complicate the process by introducing the concepts of warranties and allocation of risk? Complicating the process before closing (i.e. the negotiation and formation of contracts) will at least slow the pace, if not reduce the number, of transactions. Since agents and brokers have a personal interest in closing deals (that’s when they get paid), they’re unlikely to embrace this apparently necessary complication.

    Moreover, I dispute that this will be consistent with the spirit of Heritage House. The court was clearly concerned about the extent to which agents would be allowed to practice law. If agents are expected to “be able to explain what [warranties] mean, their scope and the impact they will have on either the buyer or the seller,” they have taken a significant step beyond the authority — in both letter and spirit — granted by Heritage House.

    Ardell — yes, discovery of the defect would prevent buyer from recovering on a subsequent fraud or concealment claim. To prevail, the buyer needs to show that he reasonably relied on the alleged misrepresentation. If buyer knows the truth about the defect, the buyer cannot show that any reliance on the misrepresentation was reasonable.

  11. If I am reading Ardell’s question right, here in NC, it doesn’t matter who tells the buyer of defect, if there is one, he can get out of the contract reguardless of who told him. The seller of the propert does not have to revel anything however, the buyer’s agent and the selling agent MUST DISCLOSE material fact and in this case, the roof is material fact. But then some roof cases can slide as the courts said we do not have to climb under houses or walk the roofs to discover as in many of these cases it will compromise our own safety but for someone like me who is afraid to death of heights, lets just say the court best better not say a leaking roof is material fact or else I’ll make the judge walk the roof of the courthouse!

  12. Hi-
    If an obvious modification is done to a 1944 1 car garage making it able to park a small car but possibly not other sizes of cars and the seller marked don’t know on the other defect portion of the disclosure, could the seller be liable if the buyers car does not fit? Would the buyer need to measure to see if his own car would fit during the inspection? Would this be a misrepresentation if the advertisement and MLS listing both advertise an attached garage-
    is there any law saying exactly what size a 1 car garage should be or what it should be able to accommodate?

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