Purchase of used house – nondisclosure

Posted by: Nov 18, 2013By Brian Stutheit

A decision from the Colorado Court of Appeals published November 7 gives a good summary of the rights of a home buyer against a home seller for nondisclosure of latent defects known to the seller.Here is some language from In re. Estate of Gattis:

    • Home sellers’ duty to disclose known but latent defects

      in the property has long been recognized… For over fifty years, Colorado has required sellers to disclose latent soil defects of which they are aware.

    • Just as home builders are in a better position to know the structural condition of a home, a seller who has actual knowledge of a latent defect occupies a similarly superior position. And where disparate knowledge exists, “a person has a duty to disclose to another with whom he deals facts that in equity or good conscience should be disclosed.”
    • However, the court will not protect buyers  defect should have been discovered.
    • Whether victimized by a negligent home builder or a seller who remains silent despite knowledge of a latent defect, “[t]he purchaser can ill afford to suddenly find a latent defect in his or her home that completely destroys the family’s budget and have no remedy for recourse.” This is so because such a purchase is “the biggest and most important investment in [one’s] life and, more times than not, on a limited budget.” 
    • Enforcing the duty of sellers to disclose known but latent defects, no less than enforcing the duty to build with ordinary care, avoids preventable harm to innocent parties and discourages misconduct. The burden to disclose latent but known defects, and thereby guard against injury to home buyers, is minor because the seller’s duty to disclose known but latent defects would apply to only material defects. “Undisclosed facts are ‘material’ if the consumer’s decision might have been different had the truth been disclosed.”). 

To understand the Gattis decision, the reader should understand that a “latent” defect is one which is hidden, or not obvious.