Duties for Sellers under Indiana Law
Sellers of residential real estate are required to make certain disclosures to potential buyers about the condition and quality of the property prior to accepting any offers. Indiana has codified the duties of sellers of certain residential property in Ind. Code section 31-21-5. Under these statutes, sellers have a duty to complete a sales disclosure form as accurately and completely as possible to alert the buyer as to the condition of the home.
According to Ind. Code section 32-21-5-7, a completed sales disclosure form must include the seller’s knowledge of the condition of the following
a. The foundation.
b. The mechanical systems.
c. The roof.
d. The structure.
e. The water and sewer systems.
f. Additions that may require improvements to the sewage disposal system.
g. Other areas that the Indiana real estate commission determines are appropriate.
Indiana uses a uniform Seller’s Residential Real Estate Sales Disclosure Form to ensure that each form contains the information required by state law. This form must be completed, signed, and delivered to the buyer before their offer to purchase the home is accepted. Ind. Code 32-21-5-10. An accurate and complete sales disclosure form is a type of assurance for the buyer. These forms also give the seller an opportunity to disclose any potential defects with the home, allowing a buyer to make an informed decision about their offer and purchase.
When is a seller liable for mistakes or omissions in the sales disclosure form?
In general, a seller will not be held liable for mistakes or omissions in the sales disclosure form so long as the seller 1) was not negligent in obtaining the information required by the form or 2) lacked actual knowledge about the defects in the home. Ind. Code 32-21-5-11(1). Simply stated, if a buyer should have inspected something and did not, or they attempted to cover up a defect on the sales disclosure form by misrepresenting or omitting a fact, they can be held liable for making a fraudulent misrepresentation on the form.
What recourse is available to a buyer when a statement or omission is fraudulently made?
If a seller fraudulently misrepresents a fact or omits an important detail on the sales disclosure form, this could give rise to a fraud claim. Wise v. Hays, 943 N.E.2d 835 (2011). For the buyer of a property to successfully bring forth a fraud claim, the buyer needs to show several things.
First, a buyer must show that the seller made false statements (or omissions) about a past or current material fact. A material fact is a fact that is essential in deciding whether one should enter into a transaction. Second, the buyer must show that the seller made those statements knowing that they were false, or that they were made recklessly without the seller acquiring the knowledge necessary to make the statement. Third, it must be shown that the seller made such statements to induce the buyer of the property to enter into the purchase. Fourth, a buyer must then show that he or she relied upon the statements, acted on the statements, and suffered harm due to that reliance. Hizer v. Holt, N.E.2d 1, 5 (Ind. Ct. App. 2010).
What should a buyer do when he or she discovers a surprising defect in the home?
There are a few steps you should take once you discover a defect in your new home. Taking these steps now may be of assistance if you decide that pursuing legal action based on a fraud claim is right for you.
Are you concerned about a serious, surprising defect in your new home? Do you have questions about your disclosure obligations? Call McNeely Law at 317-825-5110 to speak with an experienced Indiana real estate attorney about your situation.
This McNeelyLaw LLP publication should not be construed as legal advice or legal opinion of any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.