Water in the basement.
It’s one of the most common post-sale surprises and one of the most frustrating for buyers. The big question that determines whether a buyer has a viable legal claim is deceptively simple: Did the seller know?
Two recent appellate decisions in Illinois offer a clearer picture of what counts as “actual knowledge” in real estate disclosure disputes and what happens when a case doesn’t meet the standard.
Case 1: Hahn v. McElroy – Evidence of Damage Isn’t Enough
In Hahn, the buyers sued the sellers after discovering mold that had not been disclosed.
The sellers admitted to previous water issues but said they were resolved three years before the sale. Their disclosure was based on the current condition of the home at the time of the sale, not on past issues that had supposedly been fixed.
Key takeaways:
- A home inspector didn’t find anything unusual.
- Mold was discovered only after drywall was removed.
- The buyers’ evidence showed the existence of mold but not that the sellers knew about it.
The result? The court ruled in favor of the sellers. Without proof of actual knowledge, the buyers’ case didn’t hold up. To make matters worse, the buyers were ordered to pay the sellers’ attorney’s fees over $27,000 based on a clause in the real estate contract.
Case 2: Poundstone v. Cook – Repairing the Damage but Ignoring the Cause
In Poundstone, the facts looked similar on the surface, but the outcome was different.
The seller, who built the home, failed to disclose ongoing water damage. The buyer did not conduct an inspection but later found rotting deck boards and evidence of repeated water intrusion.
What swayed the court this time?
- The seller had replaced damaged wood but didn’t address the water issue that caused it.
- He claimed ignorance, but as the builder and longtime homeowner, the court believed he should have known.
- The court determined that patching the symptoms while ignoring the cause didn’t absolve him of responsibility.
The buyer was awarded $104,000 in damages and over $34,000 in attorney’s fees.
What These Cases Mean for Buyers and Sellers
Together, these cases make two things very clear:
- Actual knowledge matters. Courts want to see proof that the seller knew about the issue at the time of sale.
- Repairs without disclosure can backfire. If a seller fixes damage but leaves the root cause untouched, a court may determine that they had enough knowledge to warrant disclosure.
For buyers, this is a reminder to conduct inspections and document everything. For sellers, it’s a cautionary tale: transparency matters and failing to disclose a known defect can be costly.
And for attorneys? These cases are essential reading. They offer a blueprint for how courts assess disclosure disputes and reinforce the importance of honest communication in every transaction.
When I am approached by Buyers who believe that their Seller knew or should have known about the condition of their property, I spend a great deal of time exploring and analyzing what I can prove before the Court. Litigation is too expensive to not have a good handle on how the case might proceed.
The Minchella & Associates Difference
With over 40 years of experience in Illinois real estate law, Erica Minchella has represented thousands of home sellers and buyers, landlords, and commercial and investment property
