Attorney Chris Combs, (Combs, Gottlieb & MacQueen, P.C.) September 2016
Question: We owned a home in Phoenix for 12 years. When we listed our home for sale, my wife, with the help of our real estate agent, completed the seller’s property disclosure statement (“SPDS”). I just signed the SPDS one night when I came home from work. Although we had done several repairs to the roof, my wife forgot about these roof repairs when she filled out the SPDS.
We sold the home 3 months ago. We received a letter from the buyer’s attorney this week saying that the buyer has had major problems with the roof. The buyer’s attorney also said that, after we moved out, the buyers found some old roof repair bills in the garage. The buyer’s attorney claims that we committed fraud by not disclosing these roof repairs, and that we now have to pay the buyers $12,000 for the cost of a new roof. Under the standard purchase contract for our home, the buyers were told that they should have a roof inspection. Why are we responsible to pay for the buyer’s new roof when my wife just forgot that the roof had been repaired a few times, and the purchase contract told the buyer to get a roof inspection?
Answer: You are correct that the standard purchase contract says that the buyer should have a roof inspection. If you and your wife failed to disclose the roof repairs in the SPDS, however, a judge would likely rule that you and your wife committed fraud. In the parlance of a card game like bridge, fraud “trumps” negligence. In other words, even though the buyer may have been negligent in not having a roof inspection, your fraudulent nondisclosure of the roof repairs should make you liable to pay for the buyer’s new roof.
Attorney Aaron Green had another example. The seller provided the SPDS, answered the question if there were or ever had been any roof problems as no since the roof had been replaced, said yes there was a roof warranty because a new roof had been installed. They did not attach the receipt to the SPDS showing the roof had been replaced along with the warranty. They did give a copy of the receipt to the buyer’s realtor but had no proof it had been received. A few months after closing the roof developed a problem. Since the roof was still under warranty the problem was fixed at no charge to the buyer. But the buyer still sued for lack of disclosure stating the seller had committed fraud. Even though the seller would have probably prevailed it was cheaper to pay money to make the nuisance lawsuit go away rather than incur attorney fees.
So how do seller’s protect themselves? Disclose, disclose, disclose. Complete the Seller Property Disclosure form in as much detail as possible. Include additional sheets if necessary. Give the listing realtor every receipt you have for a major repair or construction project completed on the house. I have started incorporating the receipts as attachments to the SPDS and putting a place to initial so the buyer is forced to acknowledge it was received. At the end of the day when you get to court he or she who has the most paper wins.