Real Estate Matters: Buyer seeks to hold agent, builder liable for water leaks
Q: A couple of years ago, we purchased a unit in a four-unit, newly built condominium in Washington, D.C. We were the second purchaser in this building.
The first unit in the building was conveyed around November 2018, and the last unit was sold in the summer of 2019. The buyers of the first unit noticed water leaks from the roof after closing. The seller (the builder) minimized the problems as a leak from a fire sprinkler head. Gradually, the first unit owners started noticing various leaks from the roof and in different locations. They reported the problem to the builder and to the builder’s agent. This real estate agent represented the builder on the sale of all four units in the building.
My question is whether the agent can be held liable, in addition to the builder, for failing to disclose known leaks from the roof while selling the other units. After protracted negotiation, the builder hesitantly replaced the roof, though the work is still incomplete two and half years after reporting the problem. Any guidance or counsel would be greatly appreciated.
A: Your basic question is whether you can hold a real estate agent liable for defects in construction of a newly built condominium unit if the real estate agent knew of those defects when listing and selling the property.
That’s an interesting question, because your letter presumes that the real estate agent knew there was a problem, knew the extent of the problem and also knew that the seller was doing nothing to correct the problem. Sam frequently tells his clients that they can’t assume or presume to know what another party in a transaction knows or is thinking when it comes to the transaction. That’s also true when it comes to what the real estate agent may have known.
Most newly constructed buildings come with a builder warranty. While that warranty is only as good as the seller providing the warranty, it is a warranty, nonetheless. Look at your situation: The seller/builder ultimately replaced the roof and is correcting the problem. That’s not nothing.
When it comes to new construction buildings, buyers often have post-closing issues with their units. In some situations, these issues are minor. Some buyers will need the seller to come back and adjust doors, replace mechanical devices, fix popped drywall screws, repair and repaint cracked drywall, and tend to a host of other “smallish” items. (We say “smallish” because they’re generally problems requiring only a day or two to fix, even if they seem incredibly significant to the new homeowner.) Not all sellers will come back to make these fixes, but some builders will fix a laundry list of items that normally occur with new construction buildings.
Of course, there are times that appliances fail, water fixtures clog, water heaters won’t heat, air conditioners won’t cool, and even new windows, walls and roofs can leak. These are bigger issues; and when they occur, the builder will shell out time and money to get the issue resolved.
In your email, you mentioned that the builder first thought the leak was from the fire sprinkler system. We assume that the builder looked at that issue, and perhaps found a leak and tried to correct it. Many builders and contractors have problems figuring out the source of water problems in buildings. Sometimes they find that water comes in through windows, roof flashing, roof penetrations or many other construction areas on and around the roof. Sometimes it takes a builder some time to find the problem and correct it.
We don’t believe that listing agents for a building necessarily have the legal obligation to let other buyers know of every problem the agent hears about, especially when the builder is addressing those issues. The agent would need to confirm that the problem was significant enough to materially affect the value of the property.
While you can’t rely on the agent for all of the information you need before purchasing a piece of real estate, we do believe that the agent has an obligation to be truthful to a buyer and must answer direct questions honestly. Every state has different laws and court cases that relate to this issue, but in general the rule is the Latin phrase, “caveat emptor,” meaning buyer beware. Buyers must investigate and undertake their own due diligence when buying real estate.
Buyer beware is a pretty high hurdle, where your state’s seller disclosure laws fit in. We can’t tell from your email whether the builder had an obligation to disclose the water leaks. But in the end, the builder came back and replaced the roof.
From where we sit, that’s a good outcome. And, if the leak is now repaired, we’re not sure what else you stand to gain by going after the real estate agent. Regardless of what they know, real estate agents do not guarantee the seller’s property construction quality.
(Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through their website, bestmoneymoves.com.)
©2021 Ilyce R. Glink and Samuel J. Tamkin. Distributed by Tribune Content Agency, LLC.