In real estate transactions, the contract contains a full disclosure requirement. Full disclosure requires both the agent and seller be truthful and forthcoming regarding any material issue that the parties know or should have known involving the transaction. A seller cannot purposefully lie or mislead a buyer, especially if it means the difference between a buyer entering a real estate transaction or not.
A seller does not necessarily commit fraud by remaining silent regarding aspects of a real estate transaction. This is especially true when the defect is open and obvious such that the buyer should have discovered the defect through a reasonable inspection. Most buyers elect to conduct an inspection prior to purchase, although some buyers waive this option.
Notwithstanding, concealment of a material defect or untrue statements may be fraud in certain instances. For example, if the seller knows that the buyer is mistaken as to certain facts and fails to correct those misunderstandings, the seller may be liable for fraud. A seller can also be liable for fraud if he knowingly misrepresents the condition of the property, and the buyer relies on this incorrect information to his detriment. Further, liability is not precluded even though the information may be in public record and the buyer could have obtained it.
Fraud can also consist of fraudulent concealment, or covering over a defect. A claim for fraud exists if the seller suppresses a material problem with the property which the buyer would have no reason to suspect.
Must a Seller Disclose Information Regarding Mudslides?
In general, a seller must disclose any material defect that he knew or should have known. Whether a seller has a duty to disclose depends primarily on the surrounding facts.
Mudslides frequently result from hillsides collapsing during heavy rain. Mudslides have been known to uproot trees. If a mudslide starts down a steep hill, it can reach speeds up to 35 miles per hour and knock down retaining walls, cause structural or foundation damage, or even destroy an entire property.
A recent California case ruled that the seller was required to disclose prior mudslides on the property even though the seller believed it had been repaired. Conversely, the Oregon Supreme Court found that the owners of a building which rested at the base of a vertical bluff should not have been surprised when a large section of the bluff collapsed on the building during a mudslide caused by excessive rainfall. The court opined that no duty exists to disclose geologic hazards which are open and obvious.
A good rule of thumb as a seller is to disclose everything known to avoid future liability.
What Defenses Exist to a Mudslide Lawsuit?
One defense for failing to disclose a potential mudslide is that it was an unforeseen event caused by excessive rain or erosion. The seller may also claim it was an “Act of God,” a legal term to describe an event outside of human control for which no one can be held responsible.
Another defense is that no duty existed to disclose the hazard because it was open and obvious. In other words, the buyer should have known the risk of mudslide was apparent through a reasonable inspection. This defense depends on what state you reside in, as mudslides are more common in some states than in others.
What Can a Seller Do to Protect Himself from Liability?
Using an “as is” warranty statement in a purchase agreement can limit a seller’s liability to a certain extent. An “as is” sale means that the buyer is buying the property in whatever condition it presently exists with all defects apparent or not apparent. A merger clause, which states that everything agreed upon is in the written contract, may also protect a seller from liability.
Do I Need a Lawyer?
An experienced real estate attorney may be able to help you determine the best course of action if there has been a mudslide. A real property lawyer can also help you obtain an injunction or represent you in a planning commission hearing.