Indiana statutes require sellers of real estate to disclose certain information about the property to prospective buyers. Sellers who fail to make required disclosures can face liability for resulting financial losses. An Indianapolis real estate lawyer can help sellers meet their legal obligations of disclosure, as well as assist buyers to access legal remedies when these requirements have not been met.
Section 32-21-5 of the Indiana Code sets forth both a seller’s obligations of disclosure and the legal remedies available to a buyer who has been afforded his or her legal rights of disclosure. A buyer who is notified of a defect has the right to cancel a real estate contract and receive a full refund of any deposits. If a transaction has already been completed and the buyer incurs financial losses as a result of a defect which the seller should have disclosed, the buyer has the right to sue the seller for these losses.
The scope of the required disclosure is codified in the statute. In general, sellers are expected to disclose any facts that impair the value of a property. These can be facts about physical conditions, such as termite damage or mold, or disputes with parties who claim to have a legal interest in the property. The scope of these required disclosure has been explored in detail in Indiana case law.
What the Indiana Supreme Court Says About Legal Disclosures
In Johnson v. Wysocki (990 NE 2d 456)(2013), the Indiana Supreme Court considered whether a seller must disclose conditions of which he or she should be aware, or only those of which he or she is actually aware. The dispute arose after the Wysockis purchased a home from the Johnsons’ family trust. The Johnsons had lived in the home and performed most of the repairs themselves, and Mrs. Johnson, acting as the trustee, signed a disclosure form indicating that there were no defects in the condition of the property.
The Wysockis had an independent inspection performed which indicated no problems in the “readily accessible areas of the building." Yet after the Wysockis moved in, they discovered structural problems and electrical code violations which cost nearly $14,000 to repair. They sued the Johnsons to recover these repair costs. The trial court found that the Johnsons should have known of the defects and awarded the Wysockis their repair costs.
But on appeal, the Court of Appeals determined that it had not been proven that the Johnsons actually knew about the defects. It therefore overruled the trial court. The case then went to the Indiana Supreme Court, which determined that the correct standard was whether the Johnsons had actual knowledge of the defects. The case was sent back to the trial court to review under the appropriate standard.
This case has important implications for both buyers and sellers in Indiana real estate transactions. The “actual knowledge” standard is higher, which makes it more difficult for a buyer to prove. But actual knowledge can also be inferred from the facts and circumstances of a sale. Sellers may not, therefore, be able to defend claims simply because they stated that they did not know of a defect. An Indianapolis real estate lawyer can help both buyers and sellers address complicated issues of a legal disclosure.