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Consumer Fraud in Real Estate: “Failure to Disclose”

Some real estate is sold in “as is” condition. This normally means that when buying property, the buyer is permitted to perform any kind of inspections or checks that they wish. In return, the seller can disclaim liability for conditions discovered later by the buyer. This is sometimes referred to as the doctrine of caveat emptor or “buyer beware.” Transactions executed under the doctrine of caveat emptor traditionally have the effect of absolving sellers of all liability for various problems later discovered. This method of transaction was the historical norm.

However, that is less often the case. In modern times, the doctrine of caveat emptor has been relaxed in favor of buyers; sellers are rarely absolved of all liability. The argument behind the added buyer protection is that it is fairer for a relatively more sophisticated seller to remain liable to a consumer in real estate transactions that involve such a large investment. In transactions to purchase real estate, buyers may even be able to bring a claim of fraud against a seller when a problem is discovered after the contract has been executed. It is important to understand the basics of these issues ahead of time, because sometimes sellers violate these protections without fully appreciating the consequences of their actions.

Failure to Disclose in New Jersey

Sellers can be liable for fraud when they fail to disclose material facts that could affect the property value and therefore influence a prospective buyer’s purchasing decision. When sellers fail to disclose conditions that are latent, not reasonably observable to a buyer, and would affect a purchasing decision, they may be liable for fraud for “failure to disclose”.

When people often think of fraud, they often imagine affirmative statements made to a buyer. However, “failure to disclose” liability is premised on the “knowing concealment, suppression, or omission of any material fact.” N.J.S.A. 56:8-2. Therefore, a seller does not have to affirmatively lie to a buyer about the condition of the property. Simply not telling a buyer about a problem with a property can qualify as fraud. The definition of what constitutes a “material fact” is also one where the law allows a degree of wiggle room. Generally, a material fact is one that significantly affects the value of the property. Conditions that could be considered “material facts” include any building code violations, defective plumbing, leaking roofs, electrical problems, a structure built without permits, or the presence of termites.

What to Do if you Suspect Fraud in Real Estate

Consumers are afforded many protections under consumer fraud laws against sellers for “failure to disclose” material facts that affect real estate transactions. If you are dealing with a possible consumer fraud case in connection with a real estate transaction, it is imperative that you consult with an attorney. A local Burlington real estate attorney can assist you in exploring options available to you under consumer fraud laws.