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FLOODED WITH REGRET: IS BUYER STUCK WITH LEAKING ROOF AFTER BUYING HOUSE ‘AS IS’

QUESTION: I bought a house “as-is” — and waived inspection — in September in a nice older neighborhood. The sellers provided a detailed Seller Disclosure Statement. In response to a question on whether the roof leaks, they said “No.” We closed on the house after we received the Seller’s Disclosure. One week after we moved in, there was a big storm. My wife noticed some water on the floor in the kitchen. When we investigated, we found the water was coming down the wall, behind the kitchen cabinets, from a leak in the roof. A contractor told us it was obvious the roof had been leaking for a while, pointing to marks at the base of the cabinets, on the kitchen floor and in the basement ceiling. He said we needed to fix the roof, tear out the cabinets, and replace the drywall behind them. We contacted the sellers, and they said we bought the house “as is” so any leaks are our problem. We may have bought the house “as is,” but that was based on the sellers’ assurance that there were no problems with the roof, basement, etc. Is there anything we can do?

ANSWER: Sellers in a real estate transaction are generally required by law to disclose any issues with the property, appliances, or systems of which they are “reasonably aware.” If the sellers don’t know whether or not there is a problem, they can check “Unknown” on the disclosure form. The law doesn’t require sellers to inspect inaccessible areas like roofs and foundations to look for problems, but if they know about a defect they must act in good faith and report it.

An “as is” clause does protect sellers from liability — but not if they had “personal knowledge about the item but failed to exercise ‘good faith’ by disclosing that knowledge.” When sellers deliberately make a false statement on a Seller Disclosure form, they can be sued for fraudulent misrepresentation. If they chose not to disclose information, they were aware of they may be liable for “silent fraud.” An “as is” clause won’t protect them if they lied.

To bring a suit on either of these theories, you have to be able to prove that the sellers knew about the leaky roof. The fact that the base of the cabinets, the floor and the basement ceiling showed signs of water damage is a good indication that the sellers knew that something was up. Whether that knowledge was enough to render the Seller Disclosure deceptive would be decided by a judge or jury.

In a recent case, a couple bought a house in an “as is” condition from sellers who — as in your case — signed a Seller Disclosure in which they indicated they were not aware of any major problems. They also indicated the house was an investment property, and they had never lived in it. The deal closed and the buyer moved in. A few months later, while she was weeding in the yard, “the ground collapsed underneath her and she found herself in the septic tank, which had only been covered by a rotting wood board with ground and weeds on top.” The new homeowner required medical treatment after the incident.

Although the sellers claimed they knew nothing about the problems with the septic tank cover, the buyer contacted a former resident who told her, when he lived at the house, the sellers knew about the improper cover of the septic tank and refused to do anything about it. This information was enough, the court said, to support a claim of silent fraud against the sellers and send the case to a jury.

If you decide to bring a lawsuit against the sellers, you may be entitled to damages for “all injuries resulting from the fraud or misrepresentation” that are the “legal and natural consequences of the wrongful act,” including your out-of-pocket expenses to fix the problem and/or compensation for the decline in the value of your home because of the leaking roof. Finally, if the cost to fix the problem is really high, you might ask for “rescission” of the sale — in which case, the sellers would take back ownership of the property, refund the purchase price and pay any damages that might be needed to restore you to the position you were in before you entered the contract.

The lawyers at GWINN LEGAL PLLC are experienced attorneys and are happy to answer your questions. Give us a call for a free initial telephone consultation about your legal needs. For consideration of your questions in our web column, please submit your inquiry on the “Contact Us” page of our website at www.gwinnlegal.com.

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ASK THE LAWYER
By: Daniel A. Gwinn, Esq.
Attorney and Counselor at Law
GWINN LEGAL PLLC
900 Wilshire Drive, Suite 104
Troy, MI 48084
(248) 970-0310
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