One of the overarching goals for private home sellers is finality: sellers want assurance that, after the closing, they will no longer be liable for any of the house’s potential structural problems. Yet, in a recent Superior Court case, Schoembs v. Schena, a couple who had sold a home back in 2007 found themselves fighting the buyers over an alleged structural defect. As William Faulkner cautioned, “The past is never dead. It’s not even past.”
The house at issue had been built upon loose fill that caused it to settle into the ground. This settling cause cracks in the foundation and, later, in the walls. The buyers allege that, prior to the 2007 sale, the sellers had been aware of both the settling of the house and the cracked foundation. The buyers further allege that, although the sellers disclosed the settling of the house, the sellers actively concealed the cracked foundation from the buyers. After the sale, the buyers discovered newly-formed cracks in bedroom walls and a large crack in the foundation that was, interestingly, concealed by a brick wall. In 2013, the buyers sued the sellers and various other parties involved in the sale.
This March, the Superior Court rejected the sellers’ attempt to have the case dismissed on at least two grounds: (1) a question exists as to whether, at the time of the sale, the sellers fully disclosed their knowledge about the effect of the loose fill upon the structural integrity of the house (i.e. the cracking foundation), and (2) the concealment of foundation cracks by the brick wall (built by a former owner but modified by the seller) raises a question about whether the sellers had intended to hide those cracks from prospective buyers. Thus, nearly eight years after the sale, the sellers will continue defending this suit.
How did these sellers find themselves in such a position? Generally, Massachusetts home buyers take a house in “as is” condition. Hence the term, “buyer beware.” Private sellers generally have no duty to disclose information about the condition of a house to prospective buyers (there are certain statutory exceptions, including, but not limited to, lead paint, urea formaldehyde foam insulation, and underground storage tanks, knowledge of which must be disclosed). It is the duty of the buyer to satisfy herself that the house is in an acceptable physical condition through the inspection process.
However, a seller cannot make false representations to a buyer as to the condition of the house, or take actions that prevent a buyer from reasonably discovering a condition during inspection. And when a seller does make a representation about the house, according to the Supreme Judicial Court, “he is bound to speak honestly and to divulge all the material facts bearing upon the point that lie within his knowledge.” Kannavos v. Annino, 356 Mass. 42, 48 (1969). In other words, fragmentary information can be just as misleading as an outright misrepresentation. For instance, in the recent case described above, the sellers had disclosed to the buyers that the home was built upon loose fill, which caused the house to settle. But the sellers did not explain that the settling caused cracks in the foundation (which were concealed by a brick wall). The sellers had spoken up, but only partially. The Court found that such failure could constitute a fraudulent concealment under the circumstances.
Exculpating Sellers from Liability in the Purchase and Sale Agreement
Generally, pre-printed (or “standard”) purchase and sale agreements will try to insulate sellers from lingering liability for possible misrepresentations with language similar to the following:
The Buyer has not relied upon the representations or warranties of either the Seller or the Broker except as specifically set forth in this agreement.
According to the Superior Court, the purchase and sale agreement involved in the Schoembs case stated that “the sellers and brokers made no additional warranties or representations to induce [the buyers] to buy the property, and they agreed to buy the property ‘As Is.’” Such clauses must be precisely drafted, as minor changes can have far-reaching effects on the parties’ remedies under the contract. See, DeWolfe v. Hingham Centre, Ltd., 464 Mass. 795 (2013) (buyer could sue seller’s broker for negligent misrepresentation as to zoning status where the Court interpreted the representation and warranties clause of purchase and sale agreement as permitting buyer to rely upon written materials provided by broker). The DeWolfe case, and its impact on brokers, will be discussed in a future article.
The following excerpt is from a lengthier provision that generally encompasses the same principal, and expressly releases the seller from liability for misrepresentations (assuming no conditions were concealed by the seller):
Buyer hereby acknowledges that Buyer has had ample opportunity to obtain an independent home inspection… Buyer further acknowledges that Buyer has not relied upon any representations of any kind or nature made by Seller concerning the condition of the Premises… Buyer hereby agrees to purchase the Premises and the fixtures and appliances as installed therein and thereon in “AS IS” condition… The Seller and the listing broker are each released from claims relating to the condition of the Premises that the Buyer or the Buyer’s consultants could reasonably have discovered…
The seller doth protest too much, methinks.
Lastly, where a seller insists upon purchase and sale language that appears to create protections for the seller above and beyond the typical disclaimer or representations, a prospective buyer may want to consider if such language is motivated by the seller’s concerns about an actual problem with the house, or whether the seller has simply engaged a nervous attorney. An example of such language may look like the following:
The Buyers, after first having been advised to do so, have had both a professional home inspection conducted of the premises and have independently verified and investigated any and all information whether or not provided by Broker(s) and/or Seller(s), if any, concerning the condition of the premises… Buyer has already, through city officials, verified any such information that is important to Buyers prior to the execution of this agreement. The Buyers further acknowledge that any such information provided to Buyers by the Broker and/or Seller does not constitute a warranty or representation by the Broker and/or the Seller to the Buyers. Buyers are satisfied with all information Buyers independently obtained prior to the execution of this purchase and sale agreement and, having reviewed same, are satisfied with the results of the inspection report as provided to Buyers by the said inspector. Buyers therefore accepts the premises in “as is” and hereby release the Seller, its heirs, interested parties, legatees, its lawyers, and/or any other person however associated and/or retained by the Seller on account of all matters contained in the home inspection and all paragraphs of the Purchase and Sale Agreement…