Court: Home sellers, real estate agents don't have to tell buyer about next-door sex offender - East Valley Tribune: Business

Court: Home sellers, real estate agents don't have to tell buyer about next-door sex offender

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Posted: Wednesday, November 28, 2012 9:30 am

Home sellers and their real estate agents have no obligation to tell buyers there’s a registered sex offender living next door, the Arizona Court of Appeals ruled Tuesday.

The judges rejected arguments by a couple buying a Scottsdale home that they had a right to know about the neighbor, especially because they had small children of their own. The court said the documents the buyers signed specifically said it was up to them to learn who was living nearby.

And the judges specifically said there is nothing unconstitutional about a state law which alleviates sellers from such disclosure.

But the judges said there may be a separate claim if the buyers can show that the sellers lied to them by saying in response to a question of why they were moving, that it was to be closer to friends. The buyers contend the sellers hid the real reason: wanting to get away from the sex offender.

That omission, wrote Judge Diane Johnsen, may have been material to whether the buyers went through with the purchase. And that, she wrote, entitles them to pursue a claim of fraud.

Tuesday’s ruling, unless overturned, is a warning to home buyers that they have to do some research on their own to know everything there is to know about a home.

The fight surrounds the purchase of a home by Glen and Robynn Lerner from Jeff and Marissa Currier. Both parties agreed to use DMB Realty to handle the transaction.

According to court records, the sellers provided the buyers with a standard Residential Seller’s Property Disclosure Statement. It contained customary information about the condition of the home, its plumbing system, utilities and the presence of insects.

That form, though, has an open-ended question the sellers are supposed to answer: What other important information are you aware of that might alter the buyer’s decision? The Curriers left that section blank.

But the form also notes that, under state law, sellers and brokers are not obligated to disclose that the property is near a sex offender.

And a section of the standard purchase agreement also says that if the presence of a sex offender nearby is material to the buyer, it is up to the buyer to investigate during the 14-day inspection period. The Lerners, after that inspection period, agreed to accept the property.

It was later found out there was a Level 1 sex offender living next door.

That is the lowest level of offender. And, unlike higher-level offenders, there is no centralized database where individuals can find out where they live.

The Lerners sued for fraud and misrepresentation. While they did not seek to reverse the sales contract, they demanded unspecified monetary damages.

When a trial judge threw out the case, they appealed.

Johnsen, writing for the majority, said that, as a general rule, sellers have an obligation to disclose things that would not otherwise be obvious to a buyer.

For example, she said a seller might be obligated to disclose to would-be buyers that water periodically pools beneath the house if a buyer could not learn that after an ordinary inspection. And in this case, where the sex offender lived is not a matter of public record.

But Johnsen and her colleagues said all that is legally irrelevant as state law spells out that sellers do not have to disclose this kind of information. And the court rejected arguments that the law violates a state constitutional provision which bars the Legislature from limiting the right to sue.

Johnsen said the fraud claim, however, is a different legal matter.

She said state law makes it fraud to knowingly make a "false and material representation" with the intent that the person hearing that would act on that information.

In this case, the judge wrote, the buyers are claiming that the sellers "misrepresented their true reason for wanting to move" by mentioning wanting to be nearer relatives when the real motive was to get away from the sex offender.

That allegation, Johnsen wrote, is enough to let a jury decide whether the buyers were defrauded.

Monday’s ruling does not guarantee that the buyers will win on that fraud claim, though.

Johnsen pointed out that the sellers contend that the presence of a sex offender "could not have been too important for the Lerners," given that they never asked the Curriers outright about the issue. And the judge said that the jury might also conclude that no prospective homebuyer would rely on a seller’s representation of the reason for a move.

That part of the ruling was not unanimous. Judge Jon Thompson, in a separate dissent, said it does not matter whether the Curriers misrepresented the real reason they were selling the house. And he said even if the sellers were trying to get away from a sex offender, failing to disclose that is not grounds for a fraud claim.

The court separately dismissed the buyers’ claims against the real estate company, saying the terms of the contract specifically spelled out what did and did not have to be disclosed.

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