REAL ESTATE LAW UPDATE
Seller's Duty to Disclose
Before building a home on property it owned, a developer obtained a study of the soil conditions in the area that included the lot for the home. The study was prompted by the fact that a church that formerly owned adjoining land had abandoned plans to build a church structure on that land because of its own study indicating that there was too much collapsible soil to support the building. After receiving the soil study of the neighboring land, the developer dug out some soil on the lot for the home, reducing its grade by about six feet, and built the new house.
That there were any concerns over soil suitability came as news to the buyers of the new home when, not long after the purchase, cracks appeared in the foundation, doors would not open or close, and, as the court later put it, "[e]vidence of excessive settling abounded."
The developer had not disclosed the contents of the soil study to the buyers. A state supreme court ruled that the buyers' lawsuit for fraud should go to a jury. The court reasoned that a developer/builder may owe his buyer a duty to disclose information known to him concerning real property, including property not being conveyed to the buyer, when that information is material to the condition of the property being purchased. To be material, the information must be "important." Importance, in turn, is measured by the degree to which the information could be expected to influence the judgment of a person buying property.
In the case before it, the court found that a jury could well conclude that the buyers would have wanted to know about collapsible soil on adjacent land before they bought their home. In the court's view, a property boundary should not be considered a perimeter outside of which, as a matter of law, nothing is material to a prospective buyer.
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