Real Estate Disclosure Obligations

January 7, 2016

Our clients with construction and real estate issues routinely ask one particular question: how will this event impact my ability to sell my home? By which, most homeowners mean, do I have to disclose this event, condition, issue to a prospective purchaser?

Clearly, disclosure requirements weigh heavily on the minds of homeowners, and it is a wise homeowner who is mindful of his or her disclosure obligations and seeks legal guidance throughout the claims process and at the time of selling his or her home.

In order to appreciate all of the ways that disclosures may come into play during a construction or real estate claim (or insurance claim, or even when there is no claim but where a homeowner has experienced a repair, other damage, or significant maintenance work), homeowners need to be aware of the statutory disclosure requirement.

Subject to some exceptions and limitations, Minnesota Statute section 513.55, subdivision 1 imposes an obligation on a seller of residential property to make written disclosure of all material facts of which he or she is aware that could adversely and significantly affect an ordinary buyer’s use or enjoyment of a home, or could adversely and significantly impact a prospective purchaser’s intended use of the home of which the seller is aware.

The statute is broad and raises the question of what is required for a specific seller with a specific set of circumstances. For instance, does a seller have to disclose the one time he or she had water come in through a window during a rainstorm? Is one instance of water a material fact that could adversely and significantly affect another owner’s use and enjoyment of the home? Factfinders, like judges, arbitrators, and juries, do not always rule consistently on these issues.

Many homeowners are under the mistaken belief that if a condition that would be subject to disclosure existed in the past, but has since been repaired, it does not have to be disclosed. Minnesota Statute section 513.55 does not contain such an exception. In fact, the common Seller’s Property Disclosure Statement form asks a seller whether certain conditions exist now or whether they have ever existed. Even a repaired problem could present a material fact adversely and significantly affecting a buyer’s use and enjoyment of the home, thereby requiring disclosure (e.g., consider the case of a moisture intrusion issue that led to mold, which even if remediated, may affect a subsequent owner’s occupancy of the unit if that subsequent owner has severe mold sensitivities).

The issues surrounding real estate disclosures are numerous and can be thorny. Understandably, homeowners look to balance limiting exposure relating to disclosures with avoiding unnecessary stigma and preserving the value of their home. For these reasons, disclosure requirements should be a part of a homeowner’s and his or her attorney’s overall analysis and consideration from the beginning to the end of any construction or real estate claim, as well as at the time of sale.