We need to start with the concept of buyer beware – caveat emptor. When we buy real estate in Ohio, the concept of buyer beware applies to the transaction. What that means in Ohio real estate law is that, if you are buying real estate, you need to inspect it and you need to rely on your own inspection of the property. Typically, sellers want a purchaser to buy the real estate “as is” subject to your own inspection.
There are several ways of getting around the concept of caveat emptor. One of the easiest ways is having representation in the contract. If the buyer has representation they can negotiate terms for which the seller warrants the condition of the property within the contract. If this warranty turns out to be untrue then you would have a contract action against the seller.
There’s another exception to the concept of caveat emptor in Ohio. That is, if the seller knew of a material structural defect in the property, hides the defect, and that defect was not discoverable by a buyer by a standard inspection, then the concept of caveat emptor doesn’t apply.
For example, the residence may have a leaky basement, but the seller didn’t disclose it and it wasn’t discoverable until after the sale when it rained. Or even worse, the seller may even put new paint over the water stains or disguise it in some other manner. These actions by the Seller could be assist the buyer in a case for nondisclosure against the seller.
Ultimately in non-disclosure cases, you need evidence that the seller knew about the defect and they concealed it, what we refer to as the smoking gun.
On the seller’s side, we have represented a seller of real estate against a lawsuit brought by the buyer of his residence arguing that the seller failed to disclose that the property had termites. In that case, we raised two defenses and prevailed: First, there was an inspection for termites and they weren’t discovered by the buyer, and second, my client didn’t know anything about the termite infestation because they were behind the wall.
Q: Does there have to be active concealment as in the case of the basement that was painted?
It depends on the unique circumstances of the sale but not necessarily. If it is a significant defect that wasn’t disclosed and is something that a normal inspection would not reveal, then non-disclosure by the seller with knowledge of the defect may be enough to make the case.
Q: How are damages calculated in a non-disclosure case?
Typically, it would be the amount of money it takes to fix the problem or the loss of value to the property, depending on the type of defect. Some defects are unfixable, as would be the case of the concealment of a sinkhole under the property and in this instance, the loss of value of the real estate would likely be the amount of damages a buyer would receive.
Additionally, if you are in a situation where the seller actively concealed material defects, there may be a cause of action for fraud based on the seller’s misrepresentations.
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