Disclosure Statement states “Seller has never lived at the property”:  Buyer Has No Claim

In Celano v Hofstra, an unpublished Michigan Court of Appeals Opinion, Seller originally purchased lakefront property for her granddaughter and granddaughter’s boyfriend to live in.  Seller later sold the property to buyers.  Seller visited the property only once and never lived there.  The statutory Seller’s Disclosure Statement contained lines through the first two pages, with the notation “Seller has never lived at the property.”  The buyers sent an e-mail to the granddaughter asking “Can Seller fill out the Disclosure to the best of her ability?  They must know some information about the age of the roof, etc.”  In response, the granddaughter replied that seller was unaware of the age of the roof and “it will probably need a new one shortly.”  Buyer had an inspection of the property which revealed no issues.  Buyer closed.  Within a few months, severe flooding occurred at the property.  The neighbors informed buyer that the property was known to flood and that the granddaughter and boyfriend had troubles with flooding.  Seller’s seller also informed Buyer that he had experienced flooding.  Buyer sued, claiming Fraud, Silent Fraud, Negligent Misrepresentation, Failure to Disclose, and Breach of Contract.  The trial court, on summary disposition motion filed by the Defendant, dismissed the case.

On appeal, the Court of Appeals affirmed.  Fraud and negligent misrepresentation claims require that the defendant make an “affirmative misrepresentation.”  Since Seller made no representations about the condition of the property, Seller could not be held liable.  Silent fraud requires that the Plaintiff supress the truth which he had a legal duty to disclose.  Seller had a legal duty to disclose under the Michigan Sellers Disclosure Act, but Seller indicated that she had no knowledge of the condition of the property; Buyer was unable to adduce any evidence that Seller was aware of the flooding and failed to disclose it.  Further, Buyer could not prove reliance, because Seller disclosed nothing and Buyer had the property inspected.  Finally, because the purchase agreement provided that Buyer was buying the property “as is,” and because there was no change in the condition of the property from that disclosed in the Disclosure Statement, Seller did not breach the contract.

This case reinforces the warning “caveat emptor:”  “let the buyer beware."

© Steve Sowell 2018