Pennsylvania Real Estate Transactions Fraud and Negligent Misrepresentation
May 21, 2023
Pennsylvania's Statutes Allow Buyers to Sue Sellers for Defects
The common law rule in Pennsylvania was "caveat emptor," or "Buyer Beware" for any purchases of real property. Under this standard, after closing, the Buyer would be responsible for the cost of repair. Modernly, the Pennsylvania Legislature placed limits on this rule, and required sellers to give buyers written notice of material defects with the property, set forth in the Pennsylvania Home Sellers: Disclosures Required Under State Law.
Understand that the Seller is not required to give a warranty. They do not guarantee the property being transferred. Pennsylvania's statute does not make Seller's liable for undisclosed defects in cases where the seller actually knew nothing about them. Nor does the statute extend protection to sellers who reasonably believed a problem had been corrected. A Seller can, however, be held responsible for actively hiding any problems in the house. Thus, a seller who knows that the roof is leaking or that a sewer line is broken and backs up regularly, the Seller should mark this on the Seller's Disclosure form.
Fraud and Negligent Misrepresentation Pennsylvania Case Law
There are different legal standards for failing to disclose. Buyers in Pennsylvania routinely make property defects claims against sellers on two grounds that are not covered in the statute. These are fraud and negligent misrepresentation. Therese areas go beyond the Disclosure Statement, yet, the Disclosure Statement may be used as evidence in bringing an action beyond the actual Disclosure Statement.
In a fraud cause of action, the Buyer must present in its Complaint as claim that the Seller intentionally failed to tell the buyer about a problem. In a negligent misrepresentation action, which is a lower standard, the Buyer needs to show that the seller should have known the defect existed or had not been repaired. For example, suppose the seller experienced water back up several years ago, then had it repaired, but further failed to disclose that the problem had happened again, the Buyer may argue that the seller should have known the repair was not successful. The Seller failed its duty to the Buyer could also accuse the Seller of intentionally failing to tell the buyer about the problem; which may be fraud. Courts have allowed the Buyer, if they prevail, to receive the costs of the repair from the sellers. In severe cases, courts have voided the transaction for the sale of the house.
Selling Broker Risk of Being Responsible for the Undisclosed Defect
The buyer may also have a remedy against the selling broker if the broker knew or should have known about the concealed defect. However, the real estate broker is responsible for sharing only information within his or her actual knowledge, so you would need to have evidence that the broker knew about it to pursue a further claim against this prospective defendant. See Schwartz v. Rockey et al, 932 A.2d 885 (Pa. 2007).
What about the Home Inspector? Could the Home Inspector Be Held Responsible for Not Discovering the Defect? Home inspectors are not legally responsible for discovering latent or concealed defects. However, if a home inspector failed to find an obvious defect within the realm of his or her professional knowledge, the inspector may be held responsible for the resulting damages. Further remedied may exist under the Uniform Trade Practices and Consumer Protection Law protects people who purchase goods or property for personal or household use, including homes. If the person making the sale uses unlawful means to complete the sale, the buyer has a remedy under the UTPCPL, which sets forth its own monetary remedy as the actual amount of damages and up to three times the amount of the damages; referred to as treble damages and which work as a punitive punishment. Therefore, when a Pennsylvania homebuyer can prove an intentional or fraudulent misrepresentation on the part of the seller or the selling broker, the buyer can ask for anything from the actual amount of the damage all the way up to three times the amount.
The first thing to do when something goes wrong with your house is to document it. Begin gathering evidence in case you have to present it in court. Take a picture of the damage and write down the date and a description of the problem. You should also immediately take reasonable self-help steps, such as turning off the water if a pipe breaks or mopping up water if a sump pump fails. After, hire a lawyer and begin the process to notify the Buyer's broker. If you did not utilize a broker, your lawyer will contact the seller's broker. If no brokers were involved, your lawyer should notify the seller about the damage and ask whether the seller knew of the problem.
Chances are some further investigations as to what the seller knew of and when. You may need to hire an expert, for example, hiring an inspector to examine the problem and see when it likely arose and whether it shows evidence of previous repairs. Also, there may be a need to approach neighbors about whether saw frequent professional who repair homes at the residence or were told about problems by the sellers.