The seller’s disclosure obligation

When it comes to the purchase of real estate, there are several important legal principles and obligations that both buyers and sellers must adhere to. One of the most crucial aspects in this regard is the seller’s disclosure obligation. This is a legal obligation that imposes on the seller of a property the duty to provide the buyer with all relevant information about the condition of the property and any hidden defects. This disclosure obligation is essential to ensure a fair and transparent deal and to protect the buyer’s interests.

The seller’s disclosure obligation is a legal obligation that requires a seller to provide all relevant information about a property to a potential buyer. The purpose of this obligation is to ensure that the buyer has all necessary information available to make an informed decision about purchasing the property. This includes both obvious information and hidden defects or issues that the seller may be aware of.

Physical defects: The seller must inform the buyer of any physical defects in the property, such as leaky roofs, foundation damage, electrical, plumbing, or heating system problems, as well as hidden insect or pest infestations.

Legal issues: The seller must disclose to the buyer any legal issues related to the property, including easements, liens, or third-party rights that may affect the property’s use.

Environmental conditions: If there are known environmental conditions that may affect the value or safety of the property, such as soil contamination or flood risks, the seller must provide this information to the buyer.

Previous renovations or alterations: Any renovations or alterations made to the property must be documented and disclosed to the buyer.

Planning and zoning status: The buyer should be informed about the current planning and zoning status of the property, as well as any changes that may affect its future use.

Maintenance history: It is important to inform the buyer about the maintenance history of the property and any ongoing or future maintenance tasks.

If a seller fails to fulfill their disclosure obligation, this can have serious consequences. The buyer may have the right to claim compensation or rescind the purchase if defects or issues are discovered after the deal is completed. This can result in financial loss for the seller, as well as lawsuits and legal costs.

It is important to note that the seller is usually not obligated to disclose defects they are not aware of. However, the seller has a duty to carefully inspect the property and be aware of any signs of hidden defects or issues that may affect the property’s value or usability.

To fulfill their disclosure obligation, the seller must act in good faith and provide all relevant information to the buyer. This may include completing standardized property information forms, providing access to the property’s documentation and history, and answering all buyer’s questions honestly and accurately.

It is good practice for sellers to seek legal advice and collaborate with a real estate agent to ensure that they fulfill their disclosure obligation correctly and avoid potential legal consequences.

In a 1991 judgment (U.1991.170.H), a buyer had acquired a property with an adjacent plot. For the buyer, it was a clear assumption that the adjacent plot could later be resold as a building plot. However, after the purchase, the buyer discovered an easement prohibiting construction on the plot. The seller had been aware of this, as they had previously sought municipal dispensation for the building prohibition and received a rejection. The seller was ordered to pay compensation to the buyer for not disclosing that the plot could not be developed.

In a 2002 judgment (U.2002.2726.V), S had obtained a condition report and rectified a number of conditions, but didn’t rectify a critical damage to the covering. In a new report from 1999, the critical damage to the covering was not mentioned. S was found to have acted grossly negligently and had incurred liability for damages.

In a 2002 judgment (U.2002.319.H), the seller had personally poured the foundation. The seller information form on self-construction was not filled out in the condition report. Since the seller was not found to have acted grossly negligently, the seller was acquitted.

In a 2002 judgment (U.2002.530.H), the property was sold with a condition report. The seller had stated in the seller information form under item 12A, “Has the plot been periodically flooded?” – Yes. “Flood last winter – case pending.” In the evidence in the Supreme Court, it was established that there had been recurring problems with the plot being flooded over the last several years, and it was necessary to pump water away from the property. Based on the seller’s statement in the seller information form that the flooding was a one-time event, the seller was found not to have fulfilled their disclosure obligation, and, therefore, the seller was liable for damages to the buyer.

The seller’s disclosure obligation is a crucial part of buying and selling real estate. It is a legal obligation that ensures the buyer receives all relevant information about the property to make an informed decision. Failure to fulfill the disclosure obligation can have serious consequences for the seller, including claims for compensation and rescission of the purchase. It is therefore crucial for both sellers and buyers to be aware of this obligation and collaborate to ensure a fair and transparent real estate deal.