Caveat Emptor: Real Estate Traps in New Jersey

Lawsuit or other action | self

[tsomer]

I need advice and can't think of a better place to get it.

I bought my house which was listed as public sewage. We later found out that the owner had disconnected the sewage and reverted to a septic system. The township requires that we reconnect, requiring extensive electrical and plumbing work, estimated at 10,000. We wish to sue the previous owners, but were advised that it would be risky. While we can prove the sewage was disconnected, it will be difficult to disprove the seller's claims of ignorance.

We are within the discovery date, according to two attorneys we spoke to. Also,we learned that the realtor did not produce a form signed by the sellers disclosing the existence of a sewage pump. Our inspector, prior to the purchase performed no survey that might have disclosed this because his ignorance.

Question: does ignorance or negligence provide a shield for real estate agents and sellers? Is it imperative to prove deliberate misrepresentation on the part of either of these two parties in order to win a judgement against them? We can prove due diligence in the review of this property prior to sale. What are the options?

[tsomer]

I humbly thank anyone who can give me any advice here.

[JerseyHighlander]

You should have this article pulled immediately...

Second, you have a good case...

[DB]

Here in California ignorance won't get you off.

Contact the local septic tank pumpers/repair businesses and see if any of them serviced the property and if so when and for whom.

It would be hard for the seller to claim ignorance if he had the septic system worked on prior to claiming it was on the city's system.

Also, does the city bill property owners for using the city sewage system? If so, did the seller ever pay this fee and when?

I'm not a lawyer.

[Lancey Howard]

Was a U&O (use and occupancy) permit required by the municipality prior to your moving in? This violation should have been caught by somebody prior to closing.

You most definitely have a case. Find a decent lawyer and go after everybody - - the seller, the listing and selling brokers (both were agents of the seller), and the inspector.
Good luck.

[BCrago66]

Ignorance generally doesn't excuse someone from liability, which is why there is a distinction between the torts of fraud, i.e, deliberate misrepresentation, and negligent misrepresentation. But your case is difficult unless the seller did in fact make some representation regarding the sewage system. Because I don't think you can establish a positive duty on the part of the seller to tell you about it.

[Swordmaker]

Our inspector, prior to the purchase performed no survey that might have disclosed this because his ignorance.

If you paid the inspector to inspect the house and he was too ignorant to competently do the job you hired him to do, you may also have a case against him. He may carry "errors and omissions" insurance for just this purpose that may pay for your corrections and fees.

[Grim]

Question: does ignorance or negligence provide a shield for real estate agents and sellers?

Sellers are supposed to disclose everything and real estate agents are responsible, at least in California, for their sellers omissions.

Is it imperative to prove deliberate misrepresentation on the part of either of these two parties in order to win a judgement against them?

Yes, you have to prove they knew about the problem and failed to disclose it. You said above that 'you learned the seller disconnected the sewage.' If you can prove he disconnected it, you'll prove he deliberately misrepresented a material fact.

Your options are to sue the sellers and the agent for the cost of the repairs or to sue to have the sale rescinded. I'm not a real estate attorney, but Robert Bruss, who is, will answer your question promptly at his website http://www.inman.com/bruss/questions.html Be sure to tell him what state you're in.

Good luck.

[Grim]

Because I don't think you can establish a positive duty on the part of the seller to tell you about it.

Real estate sellers are required in most states to disclose all known material facts regarding the property in question. In this case, the existance of a clear sanitation violation, is a major one.

The only thing at issue is whether or not the seller knew of the problem or not. The agent and the broker are less apt to know about the sewage hookup and the inspector, generally, is not going to be liable for a material problem if it isn't readily visible.

[Grim]

If you paid the inspector to inspect the house and he was too ignorant to competently do the job you hired him to do, you may also have a case against him. He may carry "errors and omissions" insurance for just this purpose that may pay for your corrections and fees.

Not a chance. Inspectors are not required to discover things that are clearly hidden from view. A review of the contract will most likely be full of disclaimers to this effect. Inspectors check for termites, wood rot, leaky roofs and the kind of things you can see by crawling under the basement or into the attic.

Inspectors are not going to be held liable for things they couldn't possibly know about or see on a visual inspections.

This is why home buyers should ALWAYS purchase a home warranty insurance policy. Mine only costs a couple hundred dollars and has already paid for itself in repairs to appliances and indoor and outdoor wiring problems electrical wiring problems.

[BCrago66]

There are 4 possible situations:

1 - Seller knew about the problem but lied. You already know this is fraud, thus you have a cause of action, no analysis required.

2 - Seller knew about the problem but said nothing. Here the rule is:

"...one may be guilty of fraud by his silence, as where it is expressly incumbent upon him to speak concerning material matters that are entirely within his own knowledge."

Again, the seller has a "duty to disclose a material latent condition, known to him but unobservable" by the buyer.

On materiality, the Court indicates what the standard is: "sufficient materiality to affect the desirability or value of the property sold, and thus make him liable for fraudulent nondisclosure..."

Weintraub v. Krobatsch, 64 N.J. 445 (1974)

3 - The seller and/or his agent didn't know about the problem, but nevertheless made a contrary representation to the buyer. This is actionable as negligent misrepresentation, under the commonlaw, including NJ:

"In effect, section 552 of the Restatement (Second) of Torts (1977) imposes pecuniary liability for negligent misrepresentation when [one] "supplies false information for the guidance of others in their business transactions, . . . if he fails to exercise reasonable care or competence in obtaining or communicating the information."

Petrillo v. Bachenberg, 139 N.J. 472 (1995)

In New Jersey, there's also a Consumer Protection statute protecting buyers against misrepresentaions, even if not negligent. I've haven't researched whether of not it applies against an non-corporate seller, but it does apply against the broker:

"An offense arises under the Consumer Fraud Act, N.J. Stat. Ann. § 56:8-1 to -20 from an affirmative act, an omission, or a violation of an administrative regulation. One who makes an affirmative misrepresentation is liable even in the absence of knowledge of the falsity of the misrepresentation, negligence, or the intent to deceive. An intent to deceive is not a prerequisite to the imposition of liability."

Gennari v. Weichert Co. Realtors, 148 N.J. 582 (1997)

Here's the NY Statute (notice the word "misrepresentation."):

N.J. Stat. § 56:8-2 (2003)

§ 56:8-2. Fraud, etc., in connection with sale or advertisement of merchandise or real estate as unlawful practice

"The act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice..."

4 - Seller didn't know about the problem, and said nothing.
I'm not too familiar with NJ law - and I am not a lawyer - so I cannot state catagoically that no cause of action lies. But I don't know what the basis of such a cause of action would be, and I cannot find it in my short research.

[dennisw]

hmmmmmmm......

[Lazamataz]

Now this article, I think, might not make the FR cut.

You are soliciting legal advice. It's pretty much illegal for anyone to give you advice who's not an attorney. I'm afraid I'll need to be Mr. Thread Nanny and alert the mods.

Please, go hire an attorney. The advice you'll get will be much more sound.

[BCrago66]

You are correct. My earlier post is corrected in my later post. If the seller or broker knows about a material latest defect, then there's a duty to diclose to the buyer - in NJ and I imagine in most states, I've seen references here are there even to a "duty to investigate" -which may make culpable even an ignorant broker who does not check out the material facts (or is "willfully blind to them), but here matters tend to get into a bit of grey area; a departure from more reliable principles.

And now I sleep.

[Jaysun]

I'm a licensed Realtor. If your State really is Caveat Emptor, then the seller and the seller's Realtor will not be held accountable. They're only required to disclose latent defects (defects that can cause you harm). This would not be a latent defect. But hey, it never hurts to try. I don't know what could be "risky" about suing the previous owners or their Realtor.