Buyer beware, or caveat emptor, as those in the old school legal field like to say. It’s a phrase that is often dropped on a person when they start lamenting about a purchase that was too good to be true. It is a phrase that also seems to be passed around when people make bigger purchases, housing for instance.
Real estate is booming in the Flathead. Much to locals’ chagrin, people are flooding in from across the country to cash in on a slice of paradise. This leaves many of the blue-collar native Montanan’s to become all too familiar with the phrase “poverty with a view” as the cost of living continues to rise. Given these circumstances, when affordable housing pops up, there is a mad dash to purchase and a bidding war often ensues. Then, to the victor goes the spoils. Recently, our office is seeing just that, though, spoiled once lustrous property that turns out to be much more defective than originally portrayed despite diligent inquiry by the buyer. Which brings us back to the buyer beware concept. Well, lucky for the buyer, there are now many exceptions to what once was a hard and fast rule.
Both sellers and their agents are required to disclose adverse material facts that a buyer is unable to readily discern. As the Montana Supreme Court has stated: “there are times when the law imposes a duty upon a party to speak rather than to remain silent and thereby to disclose information to place the person with whom he is dealing on an equal footing with him. The failure to speak in such a case amounts to the suppression of a fact which should have been disclosed and constitutes fraud.” Mends v. Dykstra, 637 P.2d 502, 195 Mont. 440, 38 St.Rep. 2010 (Mont., 1981) (quoting Lyle v. Moore (1979), Mont., 599 P.2d 336, 339, 36 St.Rep. 1307, 1312).
Similarly, in Poulsen v. Treasure State Industries, Inc. (1981), Mont., 626 P.2d 822, 829, 38 St.Rep. 218, 226, the Montana Supreme Court found constructive fraud when sellers failed to disclose to buyers “serious impairments to the property which (the buyers) had no reason to suspect.” In Poulsen, 626 P.2d at 828, 38 St.Rep. at 225, the Court relied upon Russell v. Russell (1969), 152 Mont. 461, 465-466, 452 P.2d 77, 79-80, in support of its finding of constructive fraud: “… fraud is complete where a vendor knowingly suppresses a serious vice of his property which the vendee had no reason to suspect.”
Additionally, this duty does not just end at the seller, but also the seller’s agent. Mont. Code Ann. § 37-51-313. Section 37-51-313 of the Montana Code Annotated sets forth the obligations of a Montana Real Estate Licensee to disclose adverse material facts:
37-51-313(3) A seller agent is obligated to the buyer to:
(a) disclose to a buyer or the buyer agent any adverse material facts that concern the property and that are known to the seller agent, except that the seller agent is not required to inspect the property or verify any statements made by the seller;
(b) disclose to a buyer or the buyer agent when the seller agent has no personal knowledge of the veracity of information regarding adverse material facts that concern the property . . . .
Adverse material facts are defined in licensing law as follows:
37-51-102(2)(a) ”Adverse material fact” means a fact that should be recognized by a broker or salesperson as being of enough significance as to affect a person’s decision to enter into a contract to buy or sell real property and may be a fact that:
(i) materially affects the value, affects structural integrity, or presents a documented health risk to occupants of the property; or
(ii) materially affects the buyer’s ability or intent to perform the buyer’s obligations under a proposed or existing contract.
(b) The term does not include the fact that an occupant of the property has or has had a communicable disease or that the property was the site of a suicide or felony.
Just know, if you fall under the category of dissatisfied buyer that is facing thousands of dollars in repairs thanks to adverse material facts that were concealed by the seller, you are not alone and there are remedies. Our office has become all too familiar with cases such as this lately, and the attorneys at Bryan, diStefano & Mattingley are knowledgeable in this area of the law. Contact our office to set up a consultation today.