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Seller lied on disclosure and didn't pull permits. Legal resourse?

We bought our house 1.5 years ago. We discovered last weekend some water issues in the basement. While the previous owners did try to remedy the water situation, they never disclosed the information in the seller disclosure (the issues have been confirmed by neighbors). We discovered today that the entire basement was remodeled incorrectly (i.e. the framing and insulation was all done wrong, which is adding to the water issues). The previous owners never pulled permits.

Do we have any legal resource? We are looking at thousands and thousands in repairs, and it is just sad that people could be so duplicitous.
  • April 05 2013 - Minneapolis
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Answers (3)

While it's true that the sellers disclosure asks if the seller is aware of work that was done without permits, the seller may claim ignorance about needing permits for the work, or were told by a negligent contractor that permits were pulled when they were not pulled. Whenever I have a client interested in a house, I check the city database of permits to determine if there was unpermitted work. I don't trust the sellers to be truthful or aware of the law.

If the sellers signed an alternative disclosure, it may be difficult to prove damages as they are basically absolved of blame - excepting perhaps in cases of fraud.

Chances are you and the sellers signed an arbitration agreement. If you had, you have two years from closing to arbitrate for damages. The cost is far less than suing in court, although you will need to pay an arbitrator. Having an attorney to represent you is optional and the arbitrator may not (if you're successful) give you back the cost of your attorney fees.

If you don't know if you signed arbitration, contact your former agent. Most larger real estate companies have electronic files of ALL documents relating to the transaction. Your agent will also have a copy.

In the event that you didn't sign arbitration, your best bet is to sue in conciliation court where the maximum damages you can collect is $7,500.  But if both parties signed arbitration, you are legally bound to use an arbitrator to settle the dispute.

First step might be to contact an attorney for a brief consultation. They can explain the odds of you successfully litigating against the former owner. And if you get to arbitration, bring along every scrap of documentation you feel you will need to succeed. That would also include estimates for repairs and having unpermitted work corrected.
  • April 05 2013
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As always with "material facts" it comes down to the seller intentionally lying or attempting to deceive the buyer. You have to essentially prove the seller lied to you or intentionally withheld material facts about the home.

Since we are not attorney's you have to speak with one and determine if you have a case. They will review the contract and all the evidence with you.

From there you also need to figure out if you agreed to "arbitration", which is a form of mediation. It means you gave up your right to go to court and sue. I can't remember off the top of my head, but I believe you have 2 years after the purchase to do this if not more. 
  • April 05 2013
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Profile picture for Mike Bottaro
The answer to your question like most good real estate questions is "it depends."  You would need to consult with an attorney to determine if the problem was a "material defect", have good cause to believe the seller(s) knew about the issue, and are still within the statue of limitations which varies from state to state.  I would consult a local attorney, but chances are you very well have legal recourse to go back and sue the seller(s).  Depending on the cost to repair the damage vs. the cost to hire an attorney you may want to do a cost analysis and make sure first it makes financial sense to begin taking legal action.  Sorry for your misfortune and best of luck to you!
  • April 05 2013
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