I received a call last week from an investor seeking advice on a property he had purchased several months earlier in Massachusetts. It was a multi-family and he had been in the process of getting ready to find tenants when he discovered that the entire building had been wired improperly. It was so blatant a violation that it would have been posed a significant risk of fire.
After asking him the obvious questions about whether or not he had the building inspected prior to purchase I discovered that he had done everything the right way. Fortunately for him, he had been successful at getting the home inspector to settle with him for most of his out of pocket expense for the wiring replacement. After I congratulated him on this feat, he told me that he was also seeking damages from the listing broker since he felt she knowingly had perpetrated a fraud.
It was then that we had a lengthy discussion about property disclosure and his prospects for sucessfully suing the broker.
Property Disclosure in Massachusetts
During the home search process, whether it is through open houses or agent accompanied, you will notice that on the dining room table along with brochures and listing sheets, there will often be a copy of a "Notice of Property Disclosure." It will cover title, zoning, system utilities, building and structural information as well as water drainage problems. As previously stated, they are often available, but not always. This is due to the fact that unlike many other states, in Massachusetts property disclosure statements are not mandatory.
When a broker takes a property listing, if it is the custom of his brokerage, he will have the seller fill out the disclosure form answering each question to the best of the owner's knowledge. It is during this process that the agent learns as much information about the home's condition as humanly possible. A broker will also do due diligence at the local town hall to further discover whatever else he can about the home.
Chapter 93A - The Consumer Protection Act
In 1968 Massachusetts adopted Chapter 93A which provides greater protection for consumers. With regard to the sale of real estate, the Regulations of the Attorney General state that an unfair or deceptive act is committed if a broker "fails to disclose to a buyer or prospective buyer any fact, the disclosure of which may have influenced the buyer or prospective buyer not to enter into the transaction."
This means that if a broker has knowledge of problems such as roofing issues, wet basements, zoning violations, unpaid betterment charges, underground oil tanks or any structural problems these must be disclosed in the listing. However, there are limitations to this law:
- Where a broker makes no representation but has knowledge of a problem, the broker will be found liable for failure to disclose the problem, but,
- Where a broker makes no representation because he has no knowledge of a problem, he will not be found liable if the problem is one which a judge decides that a "reasonable" broker should not have known.
While my investor was correct in going after the home inspector since he missed the wiring problem in his inspection, the question of the listing broker's culpability was yet another matter.
Previous court cases have exonerated brokers where there is no proof that they had knowledge of a problem or if the judge ruled that there is no evidence that a "reasonable" broker should have known the specific facts.
Brokers rely mostly on the information given to them by the seller and a seller's only obligation is to disclose the presence of lead paint and urea formaldehyde foam insulation. However, when specifically asked, a seller cannot misrepresent the facts about his property.
With this in mind, if you are in the process of purchasing a home and have any specific questions, you should directly pose those questions to the seller or the listing broker. In this case, both the seller and the broker must provide you with accurate information.
However, proving that a listing broker had prior knowledge of a poor electrical wiring system may be too high of a burden.
Copyright 2009 - Claudette Millette, President, TheBuyersCounsel - 800-392-1446, E-mail
Ashland, Holliston, Hopkinton, Natick, Newton, Northborough, Framingham, Sherborn, Southborough, Sudbury, Wayland, Westborough