Revealing Trend in Real Estate : Vermont Deaths Underscore Drive to Require Sellers to Disclose Problems
When Steven Converse Brooks sold his Burlington, Vt., home to John and Linda Cifarelli in 1988, he neglected to tell them that a faulty boiler in the house had leaked poison gas, injuring his girlfriend and daughter.
Three months after they moved in, the Cifarellis and one of their daughters were found dead of carbon monoxide poisoning.
Brooks now faces up to 15 years in prison because a state court last month found that his failure to disclose the information constituted involuntary manslaughter.
Although the case--believed to be the first criminal conviction resulting from failure to disclose property defects before a sale--received little publicity outside Vermont, it has reignited a debate over the types of defects sellers must disclose and spurred the nation’s largest realty trade group to try to get disclosure laws on the books in all 50 states.
“It’s a little early to say whether this is a watershed decision by the court, but clearly it’s a reminder to sellers that the more they disclose, the better,” said Chip Kunde of the National Assn. of Realtors.
Only California and nine other states now have laws requiring sellers to tell prospective buyers about defects in their homes.
Lawmakers in about 20 states are expected to propose disclosure laws in their 1993 legislative sessions, and Kunde said realty trade groups in nearly all of those states have promised to work for their passage.
For years, many realtors in California and across the nation fought efforts to expand disclosure requirements, fearing that buyers who knew too much about problems in a house would be too scared to make an offer.
But that began to change in the 1970s, after many sellers and real estate agents were successfully sued for failing to disclose costly problems to home buyers.
Some congressional representatives and consumer advocates have called for a national disclosure form that sellers in every state would have to fill out when they put their home on the market.
But most real estate agents are opposed, saying a generic form might overlook each state’s individual problems.
“Californians need to know if the home they’re buying is on an earthquake fault, but it’s a non-issue if you’re buying in Montana,” Kunde said. “The decision on what needs to be disclosed and what doesn’t should be decided on the state level, not by Washington.”
Kunde said California’s disclosure law, which took effect in 1987, is probably the toughest of the 10 in existence. Still, some experts say, it has its share of loopholes that need to be closed.
The California Assn. of Realtors’ two-page disclosure form asks about the condition of more than 50 appliances and other items in the seller’s home, from dryers and ovens to window screens and sprinklers.
But the seller only has to disclose whether, to the best of his knowledge, the items are in “operating condition” and provide a few details about those that aren’t.
“The current form leaves sellers some room to wiggle out of any liability,” said Jeffrey D. Masters, who has litigated several disclosure-related suits for the Century City-based law firm of Cox, Castle & Nicholson.
“You have to tell the buyer whether your spa or appliances are in operating condition, but you don’t technically have to say if they’re standing on their last leg.”
Disclosure guidelines for more expensive items, such as roofs and electrical systems, aren’t much tougher: The seller must simply say whether he is “aware” of “significant” defects in these items.
“Cracks in a stucco wall might not seem ‘significant’ to a seller, but it can be a real flash point for the buyer,” Masters said. “That’s the type of issue that often lands everybody in court.”
To reduce the chances of triggering a lawsuit, some real estate agents have begun adding lengthy addenda to their disclosures.
Many agents in Riverside, for example, now tell buyers if a home is near the infamous Stringfellow Acid Pits, a toxic dump that was closed 10 years ago.
Some agents doing business in areas near planned extensions of the Metro Rail line are disclosing the construction plans, even though they can’t be sure if close proximity to the line will hurt a home’s value or help it.
And in hillside areas from Malibu to San Diego, many agents disclose that the homes may be susceptible to landslides in heavy rains.
Agents point to such unusual disclosures as proof that the state law is working and shouldn’t be tinkered with.
“The majority of agents and sellers are disclosing everything they could possibly know about a property’s defects,” said Walt McDonald, a Riverside broker and president-elect of the California Assn. of Realtors.
“More laws aren’t going to get that handful of dishonest people to fully disclose their problems--it’s just going to create more paperwork and confusion for the people who follow the law.”
Although figures on the number of real estate deals that wind up in litigation aren’t kept, attorney Masters estimates that the number of cases in which disclosure is a factor has jumped about 35% over the last several years.
The increase has been a boon for many agents and lawyers who specialize in interpreting the state’s disclosure laws.
“I don’t want to call it a ‘growth industry,’ but I certainly have been busy over the past few years,” said Richard Rosenthal, a Los Angeles real estate broker who earns $200 an hour or more as an expert witness in disclosure cases.
Meantime, home sellers who are worried about what they must disclose to prospective buyers might want to follow the advice of Paula Reddish Zinneman, another lawyer who specializes in such lawsuits.
“If you’re selling your home and don’t want to tell the buyer about a defect, you probably have to,” she said.
The Gray Areas Under state law, all California home sellers must disclose to a buyer any defect they know about that would have a “material effect” on the value of their home. While a leaky roof or faulty electrical system must be disclosed, the decision to tell prospective buyers about many other items isn’t as cut and dried. Here’s a list of problems that some realtors say must be disclosed, and other realtors say need not be. The presence of a mental-health facility or drug-rehabilitation clinic in the neighborhood. High volumes of traffic at certain times of the day, such as the morning or evening rush hour. Nearby schools, especially if they’re for “problem” students. Proposed street or transit programs that could affect traffic. A rising local crime rate. Proposals that could increase noise levels in the neighborhood. Proposed legislation or bond measures that, if passed, could increase property taxes. A leaky roof or other defect that has caused problems in the past but has been remedied.
