Rules of Disclosure Buying, Selling — and Telling

Home sales rarely if ever happen sight-unseen, and condominium and cooperative units are no exception. When purchasing a lived-in space from its previous owner, a buyer may expect to receive certain pertinent information that could impact the offering price – or even the buyer’s interest in the property itself. Rules and regulations regarding what sellers must disclose have been established in effort to ensure that buyers can make fully-informed choices, and don’t find themselves stuck living in the proverbial lemon. While much of the burden tends to fall on the buyer to be astute, do their due diligence, ask important questions, and observe with care, both sides of an apartment transaction would be well-advised to study up on disclosure protocol before entering into a deal.

Caveat Emptor

New York and New Jersey have similar rules when it comes to condo sales, in that the onus of ensuring that the goods are as advertised falls on the buyer.

“Between purchaser and seller, the rules subscribe to one of the few Latin phrases that almost everyone knows: ‘caveat emptor,’ or, let the buyer beware” says attorney Matthew J. Leeds, a partner with Ganfer & Shore LLP in Manhattan. “This means that generally, the seller does not have any obligation to disclose facts to a purchaser. It is up to the buyer to either ask to perform certain inspections, or to waive said inspections. The purchaser then has to decide if they still want to undertake the risk of purchasing.”

In New Jersey, the aforementioned Latin credo was the law of the land until the 1970s, until a state supreme court decision in the case of Weintraub v. Krobatsch led to an updated interpretation. According to J. David Ramsey, a shareholder with Becker & Poliakoff in Morristown, a scuffle over a seller’s (Ms. Weintraub) failure to disclose a cockroach infestation to a home buyer (the Krobatsches) resulted in the supreme court finding that said failure “may perpetrate a fraud that would excuse the purchaser from performing under the contract.”

“Since then, the law has developed, and New Jersey courts have held that the failure to disclose a material fact entitles a purchaser to either cancel a contract or sue for damages once the closing has occurred,” Ramsey explains. “This begs the question as to what constitutes a ‘material fact.’ As one example, it has been held that the failure of a builder to disclose that there was an environmentally contaminated site next to homes being sold was a fraud. In addition, New Jersey courts have imposed on sellers an implied warranty of habitability. In other words, unless the entire home is habitable, the seller must disclose if there is any condition that renders it uninhabitable.”

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