A Seller’s Liability For a Leaky Basement

There is nothing wrong with purchasing a home that has a leaky basement. Basements do have the propensity to leak in older homes. However, if a Seller sells their home, but fails to disclose to the Buyer that they knew about having past water problems in their basement, then that poses a legal problem for the Seller. Whether a Seller is liable for the leaky basement after they disclosed what they had thought was the source of the leak is an even 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 Notice is a legal document that gives the Buyer the details of the property to be sold. This form should not be taken lightly as it is a legally binding document. You should complete the form without the assistance of your real estate agent or other third party. Reveal the truth of what you know.

According to real estate law, A Seller needs to provide a good faith disclosure for any known material defects affecting the home. Here are but 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.

If a Seller doesn’t know about a home’s material defect, then they can’t disclose something that they don’t know about. For instance, if there is a problem with the home’s heating system that is later discovered by the Buyer three months after closing on the home- the Seller is protected. But if the Seller knew that they had a problem furnace and failed to notify the Buyer, they would be violating the law.

Additionally, the Real Estate Seller Disclosure Law does not require the Seller to undertake any specific investigation or inquiry into the items on the list when completing the disclosure statement.
The law does not require that the Seller uncover items that they are not knowledgeable about. It doesn’t require that Sellers have the knowledge of a licensed contractor either. The Seller disclosure should not be considered a warranty against defects. It relates only to those material defects known to the Seller when the disclosure statement is completed.

Buyers should not substitute the Seller’s Disclosure statement for a home inspection performed by a licensed home inspector. Instead, the Buyer should use the the Disclosure Statement in conjunction with a home inspection report to 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.

About David Soble. Since 1990, real estate and finance attorney,  David Soble  has been a “big bank insider” representing lenders, loan servicers, 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. 

Claim Soble’s newest Ebook “Shady: How To Protect Your Legal & Financial Interests When Doing Business With Family Or Friends.”


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