Buying a home is one of the most significant investments a person can make in their lifetime. However, even with careful research and due diligence, a home may have hidden defects that can be costly and dangerous. In New York, the law requires that sellers disclose any known defects, but what happens when a defect is not disclosed, or the seller is not aware of it? What can a buyer do when they discover defects after purchasing a home? In this article, Eastcoastlaws.com will explore common home defects in New York and the legal options available to buyers to address these issues. Whether you’re a first-time homebuyer or a seasoned homeowner, understanding your rights and options can help protect your investment and ensure that you have a safe and comfortable home.
The Basic Rule in New York Is “Buyer Beware”
The phrase “Buyer Beware” refers to the legal principle of caveat emptor, which means that the buyer is responsible for inspecting and evaluating the quality and condition of goods or services before purchasing them. In New York, the basic rule of caveat emptor applies to most transactions, except for those where the seller has engaged in fraudulent or deceptive practices.
Under the principle of caveat emptor, the seller is not responsible for defects or issues with the product that the buyer could have discovered through reasonable inspection. Therefore, it is up to the buyer to thoroughly inspect and evaluate the product before purchasing it.
However, if the seller intentionally conceals defects or misrepresents the quality or condition of the product, the buyer may have legal recourse to recover damages or seek a refund.
It is important for buyers in New York to be aware of their rights and responsibilities when making purchases. They should carefully examine and evaluate the products they are interested in, ask questions about any potential issues or defects, and seek legal advice if they believe they have been the victim of fraudulent or deceptive practices.
Remedies Against the Seller Under the Property Condition Disclosure Act
Before you sign the purchase agreement, as required by New York law, the seller must provide you, the buyer, with a disclosure statement. (This is from the Property Condition Disclosure Act (PCDA), which is found in New York Real Property Law sections 460–467.) The disclosure statement must be affixed by the parties to the purchase agreement, as required by law. Instead of providing you with a disclosure statement at the closing, the seller of your house may have adhered to the custom in New York and given you a $500 credit.
The seller may be responsible for your actual losses under the PCDA if the seller provided you with a disclosure statement but failed to indicate a known flaw. Your ability to demonstrate that the seller had real knowledge of the problem and took action to keep you from discovering it, however, will determine your ability to pursue damages under the PCDA.
Remedies Against the Seller Under New York Case Law
In addition to the PCDA remedies available to you, the New York case law (often known as “common law”) established by the state’s appellate courts may also allow you to recover damages. The conclusions included in a judge’s judgment in one of these courts become law.
The New York appellate courts developed the following remedies.
Fraud or Fraudulent Misrepresentation
If you can demonstrate any of the following, the home seller may be liable to you for fraud or false misrepresentation:
- the seller made a written or oral statement of fact that was false, and known by the seller to be false, or omitted a material fact
- the statement or omission was made, or not made, to induce you to rely upon it and purchase the property
- you relied upon the statement or omission, and were justified in doing so, and
- you sustained an injury due to your reliance on the statement or omission.
Keep in mind that you would have to demonstrate both that the seller made a misleading statement or omitted to make one, as well as that you had a good reason to rely on it. A New York court can dismiss your claim for failing to conduct additional inspections, for instance, if you engaged an engineer to do an inspection but the inspection turned out to be inconclusive.
Although you might not have been able to find the problem on your own, even with a reasonable and rigorous inspection, the seller could be held accountable if they actively disguised it or if it was something that only they knew about. False statements in the PCDA disclosure statement are seen by some New York courts as proof of the vendor actively concealing the problem.
Breach of Contract
The seller may be liable to you for breach of your purchase contract depending on its specific provisions. You would have to demonstrate that the seller provided a guarantee to protect you against the flaw in the contract and that the warranty did not enshrine the deed (the document that the seller gave you at the closing passing title to you). Because the typical New York purchase contract contains an “As Is” clause saying that you, the buyer, have accepted to purchase the property in its current state without any warranties from the seller, it may be challenging to prove that the seller provided you with a warranty in the contract. The PCDA disclosure statement is designed to be annexed to the contract, but since it makes it clear that it is not a warranty, you cannot use the statements’ representations to support a claim of contract violation.
Even if your purchase agreement does not state that the property is being sold “as is” or with any specific warranties regarding its condition, these warranties frequently expire after the closing, either by their own terms or under the “Doctrine of Merger,” a general contract law in New York that essentially says that all warranties in the agreement merge into the deed to the property that the seller gives you at the closing. If your purchase agreement clearly indicates that all or some of the provisions will survive delivery of the deed, you can avoid the merger.
Remedies Against the Brokers in the Transaction
The basic principle of “caveat emptor” that pertains to the seller’s broker or agent, commonly referred to as the listing broker, has also been weakened by New York courts. Both the listing broker and the buyer’s broker may be liable to you if they knew about a substantial fault but neglected to disclose it to you. The broker did not have to give you a formal disclosure statement; they might have informed you verbally or in writing. Additionally, you would need to demonstrate that you were unaware of the flaw and lacked the tools necessary to find it during your inspection or other research, such as speaking with nearby residents or the local government. The purchase contract’s “As Is” clause won’t shield your broker from responsibility to you.
The listing broker may be liable to you and is subject to some limited disclosure duties under the PCDA. The listing broker was obligated to inform you of the PCDA’s disclosure requirements if you were not represented by a buyer’s broker throughout the purchase process and might be held accountable for failing to do so before you signed the contract.
Taking Action If the Home Inspector Violated Licensing Requirements
In New York state, regulations (Title 19 NYCRR Section 197.4 -197-5.) require that home inspectors provide all customers a written contract describing the cost and the scope of the inspection, and inspect at least those home systems and components listed in the regulations. Home inspectors are permitted by the Licensing Department to stipulate a contractual limit on their liability to you. They can achieve this by limiting the scope of the job to specific house systems or components, or by capping potential losses at the sum stipulated in the contract or the inspection fee.
Although New York courts have concluded that you cannot directly sue the inspector under these licensing standards, you may use a breach of the rules as proof of carelessness in a claim against your home inspector (see below for a description of possible negligence claims). If your inspector breaks the rules, you can also report them to the licensing department. While filing a report like this won’t get you your losses back, it might stop the inspector from breaking rules or acting carelessly again.
Remedies Against an Inspector for Negligence or Gross Negligence
You might be able to sue your inspector for negligence if:
- the defective item was within the scope of the inspection described in the inspection contract, and
- the inspector failed to find the defect due to having failed to make a reasonable inspection within the scope of the inspection described in the inspection contract, or
- the inspector failed to report the defect to you.
Yet, an inspector might not be held accountable if the report flagged the flaw and offered you the chance to pay more money for a more thorough inspection of the product.
Normally, New York courts will uphold the liability restrictions stated in the inspection contract. If the contract excludes the defective item from the inspection’s scope or caps damages at a certain amount, they may decline to award you damages. But, if the inspector is egregiously irresponsible, the courts might disregard the contract’s culpability restrictions. Gross negligence is typically defined as willful misconduct or behavior that exhibits a heedless disdain for the rights of others.
Consumer Protection Law Remedies Against Seller or Broker
It might be possible for you to sue a property seller or broker for damages under the New York state consumer protection law. (N. Y. Gen. Bus. Law §349). The law prohibits deceptive acts or practices in the conduct of business or in the furnishing of any service within the state. Consult an attorney for more information.
New York City has its own consumer protection laws that apply to homes located in the city. Consult an experienced real estate attorney in your community to find out whether a similar local law might apply to you.
What to Do When You Discover a Home Defect
It is important to act quickly after discovering a home defect because liability is limited by time. You should take the following steps immediately to protect your rights:
- Review your purchase contract for “As Is” warranty merger provisions or any other contractual warranties or limitations on your rights against the seller.
- Review your inspection contract and inspection report to determine whether the inspector should have found the home defect; whether the report listed the defect or raised any red flags that should have been further investigated; and whether the inspection contract limits the liability of the home inspector.
- Investigate—ask neighbors or local officials whether they know anything about the defect or ever saw any workmen, or issued construction or repair permits, and consider hiring an inspector to assess what conditions would have been present and visible at the time of sale.
- Write a demand letter to the party you believe responsible, describing the defect, why the party is responsible, and asking for a specific repair or a dollar amount for the repair. (This serves a double purpose: If it doesn’t work to avoid a lawsuit, it will serve as evidence regarding the nature of your claim and your attempts to take appropriate action if you decide to sue.)
You might wish to contact the attorney who closed your purchase, or another experienced real estate attorney, to help you with these steps.
How Much Compensation You Can Ask For
If a court rules that the seller is responsible for your losses, you will be given a sum that represents your real damages—the sum required to make you whole and pay you for your losses—but no further money. This sum is often calculated by adding up all of your repair or replacement costs to address the fault.
The courts in New York have acknowledged that there are a few situations in which a buyer may be given punitive damages (damage in addition to costs, intended as punishment). The evidence must demonstrate that the seller’s actions were outrageous or purposeful, motivated by hatred, malice, or other evil motives, or displayed such a disregard for the interests of others as to be deemed willful or wanton in order for punitive damages to be awarded.