Home Buyers Beware: Georgia’s Not-So-Informative Disclosure Laws.

It is a home buyer’s worst nightmare: They learn of expensive defects in their new home after the ink has dried on their purchase agreement. Georgia law can be somewhat confusing as to the rights and protections a home buyer has when it comes to a seller’s obligations to disclose defects in the home they are selling, though it does provide some remedies to buyers who may not have been told of defects before they bought the home. Importantly, the buyer is not automatically entitled to a legal remedy just because there is a defect. Plus, there is a relatively high standard they need to meet in order to get legal relief.

Under Georgia law, the seller is obligated to disclose material defects about the property. They also have a legal obligation to truthfully answer any questions asked of them during the sales process. This law places much of the onus on the buyer to learn of any defects. Also, the buyer cannot come after the real estate broker for a failure to disclose unless the broker did not truthfully answer their questions. There is no obligation for a broker to share information about defects with a buyer on an unsolicited basis.

There Is No Seller Disclosure Form Required in Georgia

In many states, the seller is obligated to complete a disclosure form that informs the buyer of any material defects. In Georgia, the seller does not have a legal obligation to complete the form. However, this does not mean the seller can get away with failing to disclose a material defect. They would still need to let the buyer know that something is wrong if they know or should know about it. Even though it is not required by law, it would still be a good practice for the seller to consider using a disclosure form so they have proof that they let the buyer know of material defects.

Sellers Should Honestly Answer Direct Questions

From a seller’s standpoint, if they are unable to answer a question being asked of them because they do not know the answer, they should honestly respond that they do not know. The seller cannot rely on “as is” language to get them out of the obligation to disclose material defects. “As is” could work for certain obvious defects, such as basic cosmetic repairs. This language may also cover defects that the seller disclosed to the potential buyer. However, this language would not help a seller who stands accused of fraudulently concealing a defect or answering a direct question untruthfully.

Buyers Should Make Sure to Ask the Relevant Questions

From a buyer’s standpoint, they should be diligent about asking questions during the sales process. You never want to be completely at the mercy of the legal process since the best court case is one that you can avoid entirely. In addition, what a buyer did or did not ask could be used against them when they file a lawsuit. If they did not make an effort to learn about a home’s defects, the court may not give them legal relief.

The Key Question Is Whether the Defect Was Material

In many cases, the issue comes down to whether or not the defect was material. Not every single omission or misstatement would be considered material. For example, broken light bulbs and other minor defects would not be considered material. What is considered material is something that would have affected the purchaser’s decision to buy the home and the price they paid for it. A buyer may not pay as much for a home, or even buy it in the first place, when there are certain defects.

The list of defects that could be considered material (that the buyer could not have known about) depends on the situation, but could include:

  • Damage to the structure of the home
  • Whether there is an easement on the property (at least one that the buyer would not have seen with a reasonable inspection of the land)
  • Mold or moisture issues (although some water damage could have been apparent in an inspection)
  • Whether the property is in a flood zone
  • Issues with the mechanical systems in the house
  • Whether work on the house was completed with a proper permit

The court would ultimately decide what is material based on the facts and circumstances of a particular situation. There are certain classes of defects that are more likely to be material than others; however, the fact that a defect exists at all does not automatically make it material.

Misrepresentations Must Be Intentional to Get Legal Relief

Georgia courts may not allow an individual buyer to sue an individual seller for negligent misrepresentation. Willful misrepresentation is fraud, and it differs from negligent misrepresentation. According to the Georgia Court of Appeals, negligent misrepresentation generally applies to professional defendants who provide false information through the failure to exercise reasonable care, and another party reasonably relied on that information. An individual buyer’s best chance at succeeding in a lawsuit involving the failure to disclose a defect in a home is probably a situation where the seller tells a lie or they did not affirmatively disclose a material defect they knew about.

Fraud is usually very difficult to prove. There is a high bar the buyer must meet to prove their case. However, that does not mean that it is impossible to win a fraud case based on a failure to disclose. As part of their fraud case, the buyer would need to show that they performed their own due diligence, and that they could not have discovered the defect on their own.

Fraud also requires that the seller lied or concealed a defect in order to induce the buyer. One cannot accidentally commit fraud. Instead, the seller needs to have had an active intent to deceive the buyer.

You Could File for a Passive Concealment of a Defect

A buyer may also have a cause of action for passive concealment. In order to successfully prove this claim, the buyer would need to show the following:

  • The concealment of the defect was an act of fraud or deceit
  • The buyer could not have discovered the defect through their own due diligence
  • The seller knew of the defect, and they said nothing

If You Could Have Noticed, You May Not Get Relief

In one case, the Georgia Court of Appeals affirmed the lower court’s ruling that denied a buyer the right to recover when they did not notice fire damage in the house. Here, the relevant facts were that the buyer had the ability to discover the damage for themselves during their inspection of the home. According to the court, the purchaser could have discovered the defect had they exercised their own due diligence during inspection.

Failure to disclose cases relate to latent defects in the home. A latent defect is one that is not obvious, but it only becomes apparent after the transaction has closed. Presumably, a buyer would not be able to sue for a patent defect, which is a defect reasonably apparent to the ordinarily prudent person. They could have, and should have, learned of those defects during the transaction process. In contrast, the seller would have reason to know about a latent defect, but the buyer would not.

The Buyer’s Remedies in a Failure to Disclose Case

If the buyer can prove that the seller failed to inform them of a material defect, they can obtain the following legal remedies:

  • The court may seek to restore the buyer to the position they were in before the sale. This could involve rescinding the sales transaction entirely and ordering the seller to pay the buyer damages.
  • The buyer could keep the home and seek financial compensation for what it costs to remedy the defect or for the drop in the value of the home.

What Did the Seller Know, and When Did They Know it?

Many failure-to-disclose cases come down to what the seller knew, or should have known, and when they knew of it. There are some instances in which a seller could not have known, nor did they have any signs that would have let them know, that there was a defect. In these situations, the buyer becomes the first one to learn of the defect after the sale. For that reason, the seller would not be liable to pay damages.

Another question is the extent of the due diligence that the buyer performed and whether they could have possibly learned of the defect during it. There are some defects that are patently obvious, and the buyer could certainly have discovered them if they had done a proper and diligent inspection.

Owners Acting on Their Own Are More Likely to Make Mistakes

When owners sell their homes without working with an experienced real estate attorney, they are more likely to make mistakes that could land them in legal trouble after the sale closes. But when owners hire an experienced real estate lawyer to assist with their sale, they could receive legal advice that could help them adequately disclose material defects and avoid lawsuits alleging that they did not do so.

Contact an Atlanta Real Estate Litigation Attorney Today

The Law Offices of Mark Weinstein, P.C. works with buyers and sellers of homes when there are legal issues regarding a possible failure to disclose a material defect or a misstatement during the sales process. It is essential that you call us early in the dispute so we can advise you of the best path forward and possible remedies. You can schedule an appointment to speak to one of our fraudulent concealment attorneys by contacting us here.