With the recent aggressive residential property market, many residential property buyers, sometimes with the guidance of real estate agents, are waiving any right to conduct a survey or inspection of a property prior to closing. Two Michigan Court of Appeals decisions rejecting claims from aggrieved buyers who declined surveys or inspections provides a cautionary tale and reinforces the need for due diligence as part of a property purchase.
In Coosard v. Tarrant (unpublished decision by the Michigan Court of Appeals dated August 18, 2022; Case No. 357950; 2022 WL 3568714), the buyer of a residential property brought a lawsuit against the seller alleging both fraudulent and innocent misrepresentation after the buyer discovered that a portion of the buyer’s apparent property, which contained a fence and a garage, legally belonged to the purchaser’s neighbors. The seller advertised the property on the MLS listing service as including a fence and garage. After the purchase, the buyer discovered that fourteen feet of their apparent property, the portion with the fence and a garage, belonged to their neighbors. The seller did not disclose the encroachment and, critically, the buyer did not obtain a survey of the property which likely would have revealed the encroachment.
The Court of Appeals upheld the trial court’s order granting summary disposition for the seller. Finding that despite the fact that the listing represented the seller’s property as including the fence and garage, there was no evidence that the seller was aware of the encroachment or knowingly lied to the buyer about the encroachment. In the absence of those facts, the usual legal rule of caveat emptor, or “buyer beware,” applies to keep the risk of loss with the buyer for any defects in the property boundaries.
In Ramaj v. Marra (unpublished decision by the Michigan Court of Appeals dated August 11, 2022; Case Nos. 355988 and 356040; 2022 WL 3333899), a buyer brought a misrepresentation claim against the seller of a house after discovering a much more severe defect in the brickwork of the house than what the seller had disclosed. The seller had disclosed to the buyer that due to the freeze and thaw cycle in Michigan, water was getting behind the brick face and popping the bricks off of the house such that the bricks would need to be periodically replaced. In reality, the brick issue was the result of a defective design that would require significant and costly alterations to rectify. There was an issue of fact as to whether the seller was actually aware of the extent of the brickwork defect, but prior to the property listing, an engineer working for the seller had identified the serious defect.
In rejecting the buyer’s claim, the Court of Appeals found that since the seller had no specialized or expert knowledge about brick masonry and there was no evidence that the seller knew, acted with reckless disregard, or acted without reasonable care about a more extensive problem, there was no proven misrepresentation that would shift the risk of loss back to the seller.
Overall, these cases emphasize the difficulty of asserting claims against real estate sellers for defects without evidence that the seller affirmatively misrepresented a condition of the property. This underscores the importance of a purchaser having due diligence performed by qualified individuals as part of a property purchase. A competent real estate attorney can assist a buyer in knowing what due diligence should be performed and advising the buyer on the risks of waiving due diligence protection.