Tag Archives: property

Home Buyer Unable to Reasonably Discover Material Fact

Caveat emptor (buyer beware) is a common advice to someone making a purchase.  In theory, a person exercising their due diligence could research every aspect of a deal before making it.  With unlimited time and resources a person could be fully informed before entering into any transaction.

However, that is not the case in reality.  People do not have unlimited time or resources.

The Arizona Legislature carved out exceptions of what may not be omitted from disclosure when buying a house.

A. No criminal, civil or administrative action may be brought against a transferor or lessor of real property or a licensee for failing to disclose that the property being transferred or leased is or has been:

1. The site of a natural death, suicide or homicide or any other crime classified as a felony.

2. Owned or occupied by a person exposed to the human immunodeficiency virus or diagnosed as having the acquired immune deficiency syndrome or any other disease that is not known to be transmitted through common occupancy of real estate.

3. Located in the vicinity of a sex offender.

— Ariz. R. Stat. § 32-2156 (A).

The Arizona Court of Appeals recently looked at whether the statute allowing the omissions during home purchases is constitutional.  Lerner v. DMB/Currier, No. 1 CA-CV 11-0339 (Ariz. Ct. App. 2014).

The facts are a homeowner decided to sell her house because a sex offender moved next door.  While selling the house neither the homeowner nor the realtor disclosed to the couple who purchased the home about the registered sex offender.  The couple sued claiming the realtor had a fiduciary duty to disclose because a home buyer should not be reasonably expected to discover a sex offender living next door, and that they would not have purchased the house knowing about the sex offender.

The constitutionality of the statute hinges upon a clause in the Arizona Constitution.

The right of action to recover damages for injuries shall never be abrogated, and the amount recovered shall not be subject to any statutory limitation, except that a crime victim is not subject to a claim for damages by a person who is harmed while the person is attempting to engage in, engaging in or fleeing after having engaged in or attempted to engage in conduct that is classified as a felony offense.

Ariz. Const. art. 18 § 6.

To determine whether a statute violates the Anti-Abrogation clause courts look to see if “those wrongs” were permissible in the common law.  Specifically, when looking at the common law, courts look to judicial opinions at the state’s inception.  The court noted the duty to disclose was traditionally recognized by Arizona’s courts, but the Plaintiffs could not cite to an opinion from Arizona’s formation of where that duty was recognized.  “As applied here, a buyer in territorial Arizona who was not in a special relationship with the seller could not sue for failing to disclose a latent defect.” Lerner v. DMB/Currier, No. 1 CA-CV 11-0339 (Ariz. Ct. App. 2014).

Since the court said the duty to disclose is a modern trend, thus there is not a violation of Arizona’s constitution.

If Arizona’s statute § 32-2156 did not exist, then it is most likely there would be a duty for a real estate agent or a seller to disclose material facts.  Since it does exist and is constitutional, home buyers beware and conduct due diligence into a home you are preparing to purchase.