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What can you do if seller fails to disclose a leaky basement?

May 23, 2017

 With all of the rainfall that has hit Missouri lately, you might have a leaky basement. Sometimes sellers of homes know that the basement has leaked during heavy rainfall but hide that information from the buyers. Typical causes of action asserted in failure-to-disclose litigation are breach of contract, negligence, and violation of the Missouri’s consumer protection statute, the Merchandising Practices Act (MPA), Mo. Rev. Stat. § 407.010, et seq. The fact that a sale has been designated “as is” might defeat a contract claim but probably not a claim under the MPA.

 

The MPA can be a defendant’s nightmare in a failure-to-disclose case. It covers residential real estate transactions and creates liability for even innocent misrepresentations:

    1. The act, use or employment by any person of any deception, fraud, false pretense, false promise, misrepresentation, unfair practice or the concealment, suppression, or omission of any material fact in connection with the sale or advertisement of any merchandise in trade or commerce . . . in or from the state of Missouri, is declared to be an unlawful practice.                                           * * *

Any act, use or employment declared unlawful by this subsection violates this subsection whether committed before, during or after the sale, advertisement or solicitation.

Mo. Rev. Stat. § 407.020.1 (emphasis added).

 

Available damages under the MPA exceed those of a mere claim for breach of contract:

1. Any person who purchases or leases merchandise primarily for personal, family or household purposes and thereby suffers an ascertainable loss of money or property, real or personal, as a result of the use or employment by another person of a method, act or practice declared unlawful by section 407.020, may bring a private civil action in either the circuit court of the county in which the seller or lessor resides or in which the transaction complained of took place, to recover actual damages. The court may, in its discretion, award punitive damages and may award to the prevailing party attorney’s fees, based on the amount of time reasonably expended, and may provide such equitable relief as it deems necessary or proper.

Mo. Rev. Stat. § 407.025.1 (emphasis added).

 

Class actions are permitted under the MPA:

2. Persons entitled to bring an action pursuant to subsection 1 of this section may, if the unlawful method, act or practice has caused similar injury to numerous other persons, institute an action as representative or representatives of a class against one or more defendants as representatives of a class, and the petition shall allege such facts as will show that these persons or the named defendants specifically named and served with process have been fairly chosen and adequately and fairly represent the whole class, to recover damages as provided for in subsection 1 of this section. The plaintiff shall be required to prove such allegations, unless all of the members of the class have entered their appearance, and it shall not be sufficient to prove such facts by the admission or admissions of the defendants who have entered their appearance. In any action brought pursuant to this section, the court may in its discretion order, in addition to damages, injunction or other equitable relief and reasonable attorney’s fees.

Mo. Rev. Stat. § 407.025.2 (emphasis added).

 

Many real estate contracts have separate disclosure forms. In the residential context in the St. Louis area, there is general disclosure form created by the St. Louis Association of Realtors. There is a federally-required lead paint and other hazards disclosure form, http://www.epa.gov/lead/protect-your-family-lead-your-home. This form is required, not only for real estate sales, but also lease transactions. Some municipalities require additional disclosures. For example, the City of Chesterfield has a noise disclosure form http://www.chesterfield.mo.us/forms-and-permits.html given the proximately to the Spirit of St. Louis Airport.

 

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SCHULTZ & ASSOCIATES LLP 

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Chesterfield, MO 63005-1221

(636) 537-4645

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