Recent Minnesota Case Highlights Issues With Home Sale Disclosures

Perhaps no transaction is more important for most Americans than the purchase of a new home.  For many, their home is their most valuable asset and their mortgage payment is their most significant debt/expense. 

Recognizing the importance of home purchases, many states, including Minnesota, have enacted consumer protection statutes protecting buyers from certain defects in the home.   For new homes, there are certain statutory warranties which last 1, 2 or 10 years depending on the type of defect.  For existing homes, the seller(s) complete and provide to prospective buyers a “property disclosure statement.”  The form includes questions about the condition of the home, the age of the roof, whether there has ever been water damage or mold present in the home. 

Issues of whether a seller properly disclosed all known conditions about a home have been litigated time and time again.   Speaking out of personal experience as an attorney who has handled some of these cases, the litigation involved in these cases can be very emotional, as the subject matter involved – the home sale/purchase transaction – was a major event in both parties’ lives.

A recent Minnesota case highlights some of these issues at play.  The case, entitled Bryan v. Kissoon, involved an alleged failure by a seller to disclose a previous fire in the home.  The buyer was highly sensitive to mold. 

The sellers completed a property disclosure statement and did disclose that the house had twice been hit by lightning.  The buyer alleged a misrepresentation because the sellers did not disclose the fact that a fire ensued as a result of the lightning strike which, of course, led to water intrusion from the firefighters putting the fire out. 

When the buyer learned of the fire from the neighbors upon purchasing the home, she paid to have a water-intrusion test performed, given her sensitivity to mold.  The test revealed significant water-intrusion damage caused by structural defects unrelated to the fire, and the buyer paid $400,000 out of pocket to remediate the damage.

The buyer then initiated suit against the sellers, claiming that if the sellers only would have disclosed the fire, that disclosure would have prompted her to order the water-intrusion test before closing, and the test, of course, would have revealed the mold and the buyer would have cancelled the purchase.

The District Court and the Minnesota Court of Appeals essentially said to the buyer “shoulda coulda woulda.”  The Court of Appeals upheld the District Court’s exclusion of evidence of damages which were related to the structural defect, not the fire.  The Court said that the buyer failed to connect the dots between the non-disclosure of the fire and the water damage.  In other words, while the sellers may have failed to disclose the fire, since the fire was not the cause of the water intrusion damage (the structural defects which apparently had existed since the home’s construction being the actual cause), the sellers were not responsible for any damages for their nondisclosure.

What does this case mean?  It means that no real estate transaction – not even the purchase of a home, which is probably the most common type of transaction – is exempt from later litigation.  The best advice I can give is to make sure you hire a top notch realtor to represent you in the sale/purchase and, when things start to turn sour, hire a competent real estate attorney with experience in handling these oftentimes difficult disputes.