The following scenario isn’t uncommon:
After a seller had mold removed from the home, the seller’s broker was given the opportunity to view the property to ensure it was gone. The broker failed to do so, but stated to the buyer and a witness that the mold situation was resolved. The only problem: a substantial amount remained, and the broker was taken to court for fraud as part of the “Failure to Properly Disclose” lawsuit filed against the homeowner.
This example illustrates the importance of filling out disclosure statements accurately, honestly and regarding changes to the property even after the report is delivered to the prospective buyer. The idiom, “The devil is in the details” couldn’t be more applicable to this stage in the home-selling process.
Below, we discuss the risks for brokers who don’t properly disclose information that can negatively affect the value of the home.
Under the Real Estate License Act of 2000, a broker risks being liable for fraud by lying, misstating, or not updating the Disclosure Statement. A failure to disclose a known defect applies to any listing sheet or advertisements for the sale of the property. In addition, any broker involved in a home purchase transaction can be liable for false or misleading statements, according to the Illinois Consumer Fraud and Deceptive Business Practices Act.
In either instance, litigation can be brought within a one year timeframe from closing to bringing a case for failure to properly disclose, but up to two years for fraud.
An action under failure to properly disclose is considered a breach of contract and carries multiple penalties dictated by the Disclosure Act and the Illinois Consumer Fraud Act. Violation of the former can mean that the broker would be responsible for damages associated with repair and court costs, as well as attorneys fees, while the latter can make brokers liable for punitive damages.
When Brokers Aren’t Liable
It doesn’t all fall on brokers.
Home sellers can also be liable for failure to disclose or for the transfer of a piece of property in worse condition than documented in a warranty, according to the purchase contract. If sellers fail to identify defects and don’t inform their brokers, then they–not you– can be liable under Illinois common fraud and negligence laws.
Home inspectors, too, are on the hook for listing defects on the inspection report. If they bypass identifying any of the home’s systems that turn out to be unsafe or not functioning, they are potentially liable, as outlined in the standards of the Illinois Department of Financial and Professional Regulation.
What Brokers Don’t Need to Disclose
To be clear, there are certain items of information that you don’t have to disclose. In Illinois, these include divulging medical information about the seller, noting an event that occurred on the property or neighboring property that didn’t impact its physical condition, or a physical condition on a neighboring property that doesn’t affect the condition of the property to be sold.
You can never be too careful, and as long as your representations are accurate and transparent, meeting the standards of the Illinois Residential Real Property Disclosure Act, you can represent your seller with peace-of-mind.
We Can Help
With almost 40 years of experience in Illinois real estate law, Erica Minchella has the expertise to bring Failure to Properly Disclose action so that your client receives the value they deserve when purchasing a home. Get started by scheduling a consultation today.