Real Estate Sales – Contract Law About Disclosure of Defects

Posted by: Jun 17, 2019By Brian Stutheit

The typical residential real estate purchase and sale uses standardized contract forms created by the Colorado Division of Real Estate. See:

Included in those standard forms is language requiring sellers to disclose any latent defects actually known to them, in writing.  Latent defects are “those manifesting themselves after purchase and which are not discoverable through reasonable inspection.” The standard form also makes both purchasers and sellers subject to “an obligation to act in good faith including, but not limited to … Property Disclosure.”   

Failure to make the disclosures required in a standard contract exposes sellers to a claim for “recission” of the contract. Recission means the buyers may elect to treat the contract as canceled, and recover everything they paid for the property. After trial in March 2019 Stutheit & Gartland obtained an order for recission on behalf of its clients. Click here for a newspaper report of the trial.

Not every nondisclosure gives buyers the right to rescind their purchase. The nondisclosure must be significant. “Rescission of a real estate purchase may be granted if the facts show that there is a substantial breach, that the injury caused is irreparable, or that damages would be inadequate, difficult, or impossible to assess.”