There is nothing wrong with purchasing a home that has a leaky basement. Basements in older homes have a tendency to leak. However, a Seller may be liable for the leaky basement. A Seller’s liability for a leaky basement often depends on whether a Seller failed to disclose to the Buyer past water problems in their basement. If the Seller discloses what was thought to be the source of the leak, but it is not, a Seller’s liability for a leaky basement is a more difficult determination.
In every residential home sale in Michigan and Ohio, a Seller must complete a Seller’s Disclosure Statement. The Seller’s Disclosure Statement is a legal document providing the Buyer details on the condition of the property to be sold. This form is a legally binding document and should not be taken lightly. A Seller should complete the form without the assistance of a real estate agent or other third party. Reveal the truth about the condition of your home in this document.
According to real estate law, a Seller must provide a good faith disclosure for any known material defects affecting the home. The following are a few items for which the condition needs to be disclosed:
- The roof, heating and air conditioning, plumbing system, electrical system; structural problems;
- Permits for additions, remodeling and structural changes to the property; water and sewage systems or service.
When a Seller is not aware of the home’s material defect, the Seller is not liable for that defect. For instance, say the Buyer discovers a problem with the home’s heating system three months after closing. If unaware of the defect, the Seller is not liable. However, if the Seller knew of the furnace problem and failed to indicate this in the Seller’s Disclosure Statement, the Seller violated the law.
When completing the disclosure, the law does not require the Seller to undertake any specific investigation or inquiry into the items on the list. Furthermore, the law does not require the Seller to uncover items they are not knowledgeable about. Sellers are not required to have the knowledge of a licensed contractor either. Additionally, the Seller’s disclosure is not considered a warranty against all defects. It relates only to the material defects known by the Seller when completing the disclosure statement.
Buyers should not substitute the Seller’s Disclosure Statement for a home inspection performed by a licensed professional. Instead, a Buyer should use the Disclosure Statement in conjunction with a home inspection report. This will typically uncover any defects with the home that the Buyer and Seller are not aware of.
Finally, for Sellers, when in doubt, disclose. Consider the fees, costs and emotional expense that you could face in the event of future litigation. Liability for a leaky basement can be costly!
About David Soble. Since 1990, real estate and finance attorney, David Soble has been a “big bank insider” representing lenders, loan providers, individuals and business owners in real estate, contract matters and financial disputes. He has been involved in over $3 billion dollars worth of hard asset transactions and has consistently saved millions of dollars for his business and individual clients.
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