Is It Fraud or Negligence for a Seller to Check Unknown on Disclosure Form for Wetlands Property?
Full Question:
Answer:
The answer will be a matter of subjective determination for the court, based on all of the facts, representations, and circumstances involved. It is possible the court may find that the seller had or should have had knowledge of the wetlands, such as through the deed or a previous disclosure form or flood insurance policy. It is also possible the court may find that the "unknown" checkbox created a duty of investigation on your part. A title company will often be hired to perform a title examination or title insurance may be provided. The determination of negligence is made upon the subjective standard of how a "reasonable person" would act in a similar set of circumstances. The practices of similar professionals in the local area may also be taken into consideration. In order to prove fraud, it must be proven that a person had knowledge of a fact that was intentionally not disclosed. We suggest you contact a local attorney who can review all the facts and documents involved.
Fraud is generally defined in the law as an intentional misrepresentation of material existing fact made by one person to another with knowledge of its falsity and for the purpose of inducing the other person to act, and upon which the other person relies with resulting injury or damage. Fraud may also be made by an omission or purposeful failure to state material facts, which nondisclosure makes other statements misleading.
To constitute fraud, a misrepresentation or omission must also relate to an 'existing fact', not a promise to do something in the future, unless the person who made the promise did so without any present intent to perform it or with a positive intent not to perform it. Promises to do something in the future or a mere expression of opinion cannot be the basis of a claim of fraud unless the person stating the opinion has exclusive or superior knowledge of existing facts which are inconsistent with such opinion. The false statement or omission must be material, meaning that it was significant to the decision to be made. Sometimes, it must be shown that the plaintiff's reliance was justifiable, and that upon reasonable inquiry would not have discovered the truth of the matter. For injury or damage to be the result of fraud, it must be shown that, except for the fraud, the injury or damage would not have occurred.
To constitute fraud the misrepresentation or omission must be made knowingly and intentionally, not as a result of mistake or accident, or in negligent disregard of its truth or falsity. Also, the plaintiff must prove that the defendant intended for the plaintiff to rely upon the misrepresentation and/or omission; that the plaintiff did in fact rely upon the misrepresentation and/or omission; and that the plaintiff suffered injury or damage as a result of the fraud. Damages may include punitive damages as a punishment or public example due to the malicious nature of the fraud.
Please see the following PA statutes:
§ 35.282. Misleading advice, assurances and representations.
(a) A licensee may not give assurances or advice concerning an aspect of a real estate transaction that he knows, or reasonably should be expected to know, is incorrect, inaccurate or improbable.
(b) A licensee may not knowingly be a party to a material false or inaccurate representation in a writing regarding a real estate transaction in which he is acting in a representative capacity.
35.312. Duties of seller’s agent.
(a) In addition to the duties required in § 35.292 (relating to duties of licensees generally), a seller’s agent owes the additional duties of:
(1) Loyalty to the seller/landlord by acting in the seller’s/landlord’s best interest.
(2) Confidentiality, except that a licensee has a duty to reveal known material defects about the property.
(3) Making a continuous and good faith effort to find a buyer/tenant for the property except when the property is subject to an existing agreement of sale/lease.
(4) Disclosure to other parties in the transaction that the licensee has been engaged as a seller’s agent.
(b) A licensee does not breach a duty to a seller/landlord by showing alternative properties to a prospective buyer/tenant or listing competing properties.
(c) A seller’s agent may compensate other brokers as subagents if the seller/landlord agrees in writing. Subagents have the same duties and obligations to the seller/landlord as the seller’s agent.
(d) A seller’s agent may also compensate a buyer’s agent and a transaction licensee who do not have the same duties and obligations to the seller/landlord as the seller’s agent.
(e) Upon entering into a written agreement with the seller/landlord, each licensee employed by the broker will act as a seller’s agent unless a licensee has been named, or is thereafter named, a designated agent under § 35.315 (relating to designated agency).
§ 35.333. Agreements of sale.
(a) An agreement of sale, other than for a cemetery lot, mausoleum or cremation space or opening, shall contain:
(1) The date of the agreement.
(2) The names of the buyer and seller.
(3) A description of the property and the interest to be conveyed.
(4) The sale price.
(5) The dates for payment and conveyance.
(6) The zoning classification of the property, except if the property (or each parcel thereof, if subdividable) is zoned solely or primarily to permit single-family dwellings, together with a statement that the failure of the agreement of sale to contain the zoning classification of the property shall render the agreement voidable at the option of the buyer and, if voided, deposits tendered by the buyer shall be returned to the buyer without a requirement of court action.
(7) A statement identifying the capacity in which the broker, or a licensee employed by the broker is involved in the transaction and whether services have been provided to another party in the transaction.
(8) A provision that payments of money received by the broker on account of the sale—regardless of the form of payment and the person designated as payee (if payment is made by an instrument)—shall be held by the broker in an escrow account pending consummation of the sale or a prior termination thereof.
(9) The following statement:
“A Real Estate Recovery Fund exists to reimburse any person who has obtained a final civil judgment against a Pennsylvania real estate licensee owing to fraud, misrepresentation, or deceit in a real estate transaction and who has been unable to collect the judgment after exhausting all legal and equitable remedies. For complete details about the Fund, call (717) 783-3658.”
(10) A statement that access to a public road may require issuance of a highway occupancy permit from the Department of Transportation.
(11) In the case of an agreement of sale for the purchase of a time share or campground membership, a statement regarding the purchaser’s right of cancellation that is set forth conspicuously in bold face type of at least 10 point size immediately above the signature line for the purchaser and that is in substantially the following form:
“You, the purchaser, may cancel this purchase at any time prior to midnight of the fifth day following the date of this transaction. If you desire to cancel, you are required to notify the seller, in writing, at (insert address). Such notice shall be given by certified return receipt mail or by any other bona fide means of delivery which provides you with a receipt. Such notice shall be effective upon being postmarked by the United States Postal Service or upon deposit of the notice with any bona fide means of delivery which provides you with a receipt.”
(b) An agreement of sale that is conditioned upon the ability of the buyer to obtain a mortgage shall contain:
(1) The type of mortgage.
(2) The mortgage principal.
(3) The maximum interest rate of the mortgage.
(4) The minimum term of the mortgage.
(5) The deadline for the buyer to obtain the mortgage.
(6) The nature and extent of assistance that the broker will render to the buyer in obtaining the mortgage.
(c) The following terms shall be printed in bold face if made part of an agreement of sale:
(1) A provision relieving the seller from responsibility for defects involving the sale property, or a provision requiring the buyer to execute a release to that effect at the time of settlement, or a provision of similar import.
(2) A provision reserving to the builder-seller the right to change, or depart from, the building specifications for the sale property.
(d) An agreement of sale for a cemetery lot or plot or a mausoleum space or opening shall contain the requirements in subsection (a)(1)—(5) and (9).
You may contact the PA real estate commission at the following address:
st-realestate@state.pa.us