Buyer beware, or caveat emptor, as those in the old-school legal field like to say. It's a phrase often dropped on a person who starts lamenting a purchase that was too good to be true. It also gets passed around when people make bigger purchases, like a house.
Real estate is booming in the Flathead. Much to locals' chagrin, people are coming in from across the country to buy a slice of paradise. Many working Montanans have become all too familiar with the phrase "poverty with a view" as the cost of living keeps rising. So when affordable housing comes up, there is a mad dash to buy, and a bidding war often follows. To the victor go the spoils. Recently, our office has seen exactly that: once-lustrous property that turns out to be far more defective than portrayed, despite diligent inquiry by the buyer. Which brings us back to buyer beware. Luckily for buyers, there are now many exceptions to what was once a hard and fast rule.
Both sellers and their agents are required to disclose adverse material facts that a buyer cannot 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 on Russell v. Russell (1969), 152 Mont. 461, 465-466, 452 P.2d 77, 79-80, to support 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."
This duty does not end with the seller. It extends to the seller's agent. Section 37-51-313 of the Montana Code Annotated sets out 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.
If you are a dissatisfied buyer facing thousands of dollars in repairs because a seller concealed adverse material facts, you are not alone, and there are remedies. Our office has seen many cases like this, and the attorneys at diStefano & Mattingley know this area of the law. Contact our office to set up a consultation.