MA real estate disclosure Chapter 93A

iStock_000003014021XSmal.jpgCaveat Emptor: “Let The Buyer Beware”

Caveat Emptor is an old common law rule which means “Let the Buyer Beware.” In plain English, it means that home buyers are on their own when it comes to the condition of the property. If there is a defect of any kind, it becomes the buyer’s problem, not the seller’s.

Most home buyers are unaware that in Massachusetts, with a few exceptions, the rule of Buyer Beware is still alive and well. That is why in the vast majority of transactions, buyers choose to have the property inspected by a licensed home inspector. And it’s also why there is a contingency in the offer or purchase and sale agreement giving the buyer the right to opt out of the agreement if there are serious issues.

But what happens if the home inspector misses a broken A/C unit, or the sellers concealed that the basement flooded, or the Realtor didn’t tell the buyers there was a Level 3 sex offender next door? These are all thorny disclosure issues.

Private Sellers: No Duty to Disclose

A private seller has no legal duty in Massachusetts to disclose anything about the property (except for the presence of lead paint). Yes, you read that correctly. He doesn’t have to say boo. Will that assist the buyer in selecting the home for purchase? Maybe not. But if the basement floods, the seller does not have to say anything about it.

A seller, however, cannot affirmative misrepresent a material fact about the property. That is, if the seller is asked a direct question, such as “has the basement ever flooded?” and he answers “never” when it has, he has lied and can be held liable for that.

Most agents will insist that Sellers fill out a Statement of Property Condition (see below) which will fully disclose just about every conceivable condition of the premises. However, the standard form does contain small print language purporting to limit the agent and seller from disclosure liability.

Real Estate Agents: Heightened Duty

Under Massachusetts consumer protection regulations governing real estate brokers, a broker must disclose to a buyer “any fact, the disclosure of which may have influenced the buyer or prospective buyer not to enter into the transaction.” This is somewhat of a subjective standard; what may matter to one buyer may not matter to another. If a broker is asked a direct question about the property, she must answer truthfully, accurately, and completely to the best of her knowledge. Further, a broker cannot actively avoid discovering the details of a suspected problem or tell half-truths. This is why most Realtors err on the side of full disclosure, as suggested in Bill Gassett’s blog.

As for that Level 3 sex offender living next door, I would advise the listing agent to disclose that fact. The Massachusetts Supreme Judicial Court has held that off-site physical conditions may require disclosure if the conditions are unknown and not readily observable by the buyer and if the existence of those conditions is of sufficient materiality to affect the habitability, use, or enjoyment of the property and, therefore, render the property substantially less desirable or valuable to the objectively reasonable buyer. I think a dangerous sex offender would be something a buyer would want to know about, wouldn’t you?

Home Inspectors

In 1999, Massachusetts joined a growing number of states that require home inspectors to be licensed. There is now a state Board of Registration of Home Inspectors. Home inspectors are now required to carry at least $250,000 of errors and omissions insurance. The board is empowered to suspend licensed home inspectors for violations of the statute or regulations and to impose civil penalties on persons purporting to conduct a home inspection without the required license.

A home inspector is one of the most important referrals your Realtor will give you. Most agents know which inspectors are great and which are terrible. If you are the unfortunate victim of an incompetent home inspectors, they can be sued civilly for breach of contract or negligence.

Massachusetts Sellers Disclosure//

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Does A Massachusetts Seller and Realtor Have A Legal Duty To Disclose The Existence of a Smelly Waste Water Treatment Plant?

Dear Attorney Vetstein:

We purchased our first home in September. We were unfamiliar with the area and relied heavily on the realtor’s knowledge. After living there for a couple of weeks, we went outside to grill and there was a horrid stench to the air. We weren’t able to eat outside and couldn’t figure out where the smell was coming from. After a few times of this, we researched the area and found out that there was the town’s waste water plant behind what we thought was a house, but what was actually the office. We did a Google Earth search on the plant and it is quite large. We bought the house mainly for the large yard and were looking forward to bbq’s, planting a garden and in general spending a majority of our time outside as we had moved from the city.

Do we have any rights? Had the real estate agent or seller disclosed the existence of the smelly plant to us we would have never bought this house. We want to sell and fear that the home will be unsellable.

Your truly,

Worried About The Smell

Dear Worried,

While your Realtor did you no favors, I’m afraid that you (and your Realtor) should have driven around and investigated the neighborhood before you purchased this home.

Legally in Massachusetts, a private seller has no obligation to disclose anything to you about the home or nearby conditions. A seller can only get in trouble if he is asked a direct question and flat out lies about it. Since you did not indicate that you asked the seller the specific question of whether there were any nearby waste water treatment plants, you most likely won’t have any luck pinning this situation on the seller.

The Realtor, while standing on different legal footing, is also most likely not to blame legally. Under Massachusetts consumer protection regulations governing real estate brokers, a broker must disclose to a buyer “any fact, the disclosure of which may have influenced the buyer or prospective buyer not to enter into the transaction.” This standard, however, doesn’t necessarily mean that a Realtor must disclose every single conceivable on-site or, in this case, off-site condition which may impact the buyer’s decision to purchase. The Massachusetts Supreme Judicial Court has held that off-site conditions may require disclosure only if the conditions are “unknown and not readily observable by the buyer [and] if the existence of those conditions is of sufficient materiality to affect the habitability, use, or enjoyment of the property and, therefore, render the property substantially less desirable or valuable to the objectively reasonable buyer.” In that case, the court refused to hold a seller liable for the non-disclosure of toxic waste contamination at the nearby local elementary school which gave the seller difficulty selling previously.

The key factor here is that the waste water treatment plant is out in the open and obvious to anyone searching nearby. This situation underscores the importance of having a Realtor who knows the neighborhood and also doing your own basic due diligence, i.e, driving around the neighborhood.

I do sympathize with you plight. I’m not sure why the Realtor didn’t feel it was necessary (assuming he or she knew of the plant) to tell you about the stinky plant. It’s certainly something I would have wanted to know. You also didn’t tell me whether the Realtor was the listing agent or your own buyer’s agent. A listing agent’s duty is to the seller and getting the home sold. They do their best not to divulge too much info about the surrounding area, lest they get themselves in trouble (like this case). A buyer’s agent would be much more likely to advise you of problematic conditions like the plant (assuming they know about it). If they didn’t know about it, shame on them.

Sorry to deliver the “stinky” news…

Yours truly,

Richard D. Vetstein, Esq.

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