Buying or selling a home is often as stressful as it is exciting. It is also fraught with the potential for a dispute over the non-disclosure of conditions of the home. If certain conditions are not disclosed on the seller’s disclosures, legal remedies may be pursued.
Greater Louisville Association of Realtors (GLAR)
If the home is bought or sold in the greater Louisville area, the dispute is typically facilitated by the Greater Louisville Association of Realtors (GLAR) rules. In the event a dispute arises, GLAR requires that it proceed through a mediation arbitration process. Arbitration means that a private attorney (either agreed upon by the parties or selected randomly by GLAR) serves as the fact-finder and decision-maker if the case is tried. The arbitration process is designed to be faster and more efficient than traditional litigation through the court systems. The GLAR process also requires mediation, which is often an effective tool at reaching a settlement prior to the matter proceeding to formal arbitration.
When Can you Bring a Claim?
The GLAR sales contract states that a “Notice of Demand for Mediation must be made within 365 days after the Party raising the claims knew, or should have known, of the existence of said claims.” If the respondent fails to respond after receiving notice of mediation, the mediator will notify the claimant of the respondent’s failure, and will affirmatively state that the respondent has refused to cooperate with the mediation requirements of the Contract. The Claimant may then pursue the matter in arbitration.
Who Can be Held Responsible?
Mediation or arbitration is typically initiated by the buyer against the seller of a home who failed to disclose material defects. Dispute resolution may also be initiated against the real estate agent/broker if the agent/broker representing the seller had knowledge of the non-disclosure(s). In addition, a buyer may initiate actions against the selling agent/broker outside of arbitration by either bringing a contractual claim in a state court and/or filing a complaint with the Kentucky Real Estate Commission (KREC).
Buyer Beware (Caveat Emptor)
Even though the disclosures are significant and should always be filled out completely and accurately, the buyer still has standards of prudence that it must meet. Many prudent buyers will conduct inspections and tests in order to fully discover and/or alleviate any potential concerns. However, the buyer’s due diligence is somewhat limited by the legal scope of a home inspection in Kentucky, which requires that the home inspection not be invasive or destructive. As a result, concealed conditions (e.g. defects or damage behind walls) may not be identified by a home inspection.
A latent defect, in this context, is a material defect that is not readily apparent to a purchaser but was known, or reasonably should have been known, to the seller. Examples include: previous mold remediation, previous roof repair, basement or window leaks, previous plumbing or water damage, framing repair, the lack or insufficiency of a vapor barrier on a brick veneer home, and other repair work which is hidden from plain sight. These latent defects are typically what lead to dispute resolution for a seller’s failure to disclosure.
If you are selling a home and have questions about disclosures, or you are buying a home and have questions about undisclosed defects, the attorneys at Commonwealth Counsel Group, PLLC would be glad to help.