I am planning to buy a condominium, which is part of a homeowner association (HOA). I observed that a couple of units have exterior issues. It looks like bubbles are in the siding. However, the unit I am looking at is so far good.
After inquiring more about these mysterious bubbles, I learned that there were construction defects in the material used (which was synthetic stucco) and there had been a lawsuit against the construction company.
The lawsuit has been settled, however, the HOA hasn’t started any work on this issue and plans to do the repair work in patches. This whole situation is not mentioned in the seller’s disclosure statement, and when checking with the seller about whether he would agree to reimburse me for this issue, the attorney said he wouldn’t accept it.
Do you think I should buy this condo?
We’re not sure what you mean by the seller not “accepting” this issue. We can only assume that you raised concerns about this issue with the seller as a deficiency in the inspection of the property, and the seller rejected any request you might have had for reimbursement of the condo’s share of the repair.
There are issues here we’d like to comment on, and we’ll start with the seller disclosure statement. Most states have seller disclosure laws. These laws require the seller of a residential home to tell the buyer of any material defects that they know of in the property. The seller will generally deliver to you a completed seller disclosure form, and this form will track the requirements of your state for the items that need to be disclosed.
Some states’ forms are more comprehensive than others, but the essence of seller disclosure laws is to give notice to a buyer of a residential property of a known significant problem with the home and/or the property.
Keep in mind that problems with a home likely refer to structural issues. But there are other issues that may fall under seller disclosure rules. We’ve received letters in the past to inquire about disclosing prior deaths in homes, crimes, neighborhood issues, neighbor issues and the like. We even received a letter once about whether a seller needed to disclose to a buyer whether a home was haunted.
We don’t think that these questions relate to what seller disclosure laws try to get at, which is whether a home has a structural problem, whether windows have major failures, whether the roof has a major deficiency and whether there may be other high home repair expenses.
To start, the seller must know (or should have known) of the problem in most instances. If the seller has no reason to know his roof is leaking and you buy the home and later find out there is a major issue with the roof, the seller would not have violated the seller disclosure laws by not telling you about the roof issue. If the seller ignored the issue and should have known about the issue (because every time it rained a puddle formed on the living room floor), you might have a case against the seller.
A couple of years ago, Sam represented a buyer of an expensive home where the seller called on a plumber to fix the water main. It was a cheap fix that wasn’t designed to last, and, as it turned out, it did not. After the closing, the buyers found out the hard way when the water main fix failed and they ended up with three feet of water in the basement. Luckily for the buyers, they called a plumbing company, and, by coincidence, the same plumber came to the home that had made the original fix.
That plumber told Sam’s clients that he had told the sellers that it would cost $20,000 to fix the problem, but the sellers instructed the plumber to patch the problem for a fraction of that cost. The plumber told them the patch wouldn’t hold. The sellers failed to disclose the issue to the buyers, and the sellers wound up paying for the repair anyway after the closing.
Your issue is a bit more complicated, as you’re buying in a condominium association. If the repair has already been budgeted for and the association has the funds to make the repairs, it may not be something that needs to be disclosed to a buyer. The repair may be material, but the association already has the funds in hand, so no special assessment is required.
In your case, the seller knows about the issue, but we don’t know if the issue is significant or not. We also don’t know if the financial impact to the association is minor or major.
We’d think that a seller should disclose to a buyer a major issue affecting the association, especially when that issue could create a special assessment that you’d have to pay. In your question, you indicated that the problem is visible but that the association sued the construction company and settled that suit. Again, if the suit was settled and the construction company paid money to the association to fix the problem, the seller might not need to disclose that. If the seller was selling a single-family home and planned to keep the money and not repair the issue, we would expect the seller to disclose the problem to you.
In this instance, the seller may not feel it’s a seller disclosure issue. From our side, we wonder why you feel it’s a seller disclosure issue and whether you are trying to get something from the seller for the issue when the association will otherwise take care of the problem. You should review the minutes and budget from the association to see what information those documents reveal about the problem. You should also get a disclosure form — if required in your state — from the condominium association.
Between your review of these documents and conversations with the association, we hope you can get answers and understanding on your issue and questions. We hope this information helps you get to the next point in your transaction.
Ilyce Glink is the creator of an 18-part webinar+ebook series called “The Intentional Investor: How to Be Wildly Successful in Real Estate” as well as the author of many books on real estate. She also hosts the “Real Estate Minute” on her YouTube channel. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact them at ThinkGlink.com.