Statute of limitations refers to the defined period within which legal actions can be brought. It sets a time limit for individuals to file claims against others. For instance, when purchasing a new house, the builder can be held accountable for any issues within a specified timeframe. Once this period has elapsed, homebuyers can no longer sue the builder.
The purpose of the statute of limitations is to ensure that legal claims are resolved in a reasonable amount of time. However, the specific limitations vary from state to state, and they differ between criminal and civil cases. I was recently surprised to receive a call from a lawyer regarding a real estate transaction I was involved in almost 18 years ago.
The lawyer asked me about a particular piece of wood used in the construction of an addition made by the seller. I found myself at a loss for words; I couldn’t answer his questions. As a realtor, I immediately thought, “Isn’t there a statute of limitations that protects me and my seller?”
Understanding the Statute of Limitations for Property Disclosures
The closing of that particular real estate deal had taken place over a decade ago, and I had represented the seller, Eric. When I provide the real estate disclosures to my sellers, I always insist that they complete them by themselves, without leaving out any details. I explain that even the smallest piece of information must be included in the disclosure.
Technically, the seller’s disclosure is the responsibility of the seller, and their real estate agent should not fill out these documents. In the case of Eric, he had lived in the house for more than twenty years. It was an old property that required some updates, which he had taken care of. He removed the outdated wallpaper and repainted the interior a neutral beige color. Additionally, he replaced the old green shag carpet with a more modern beige carpet.
Despite the dated aspects of the house, it had its redeeming qualities: stunning ocean views, three bedrooms, and two baths. However, it lacked a master suite and only had a small galley kitchen. On the bright side, the finished basement featured a fantastic entertainment bar and a patio overlooking the ocean, perfect for hosting guests.
The Importance of Disclosing Flooding Issues
My memory has its own statute of limitations too! I vividly remember all the details from the open houses I held. However, I couldn’t recall anything about the basement ever flooding or being refurbished. I couldn’t recollect any conversations with Eric about the basement walls, water damage, or drywall replacement.
Interestingly, someone from the fire department visited the house recently and mentioned that the property experienced numerous floods during Eric’s time as the owner. The fire department had been called multiple times for assistance.
What, then, should a seller disclose to potential buyers? The seller’s disclosure typically covers the property’s condition. In Kentucky, for example, the Seller’s Disclosure of Property Condition summary includes:
- House Systems: Plumbing, electrical system, appliances, floors and walls, doors and windows, ceiling and attic fans, security system, sump pump, chimneys, fireplaces, inserts, pool, hot tub, sauna, sprinkler system, heating system, cooling/air conditioning, and water heater.
- Foundation/Structure/Basement: Specific questions regarding water-related issues.
- Roof: Leaks and repairs.
- Land/Drainage: Soil stability, drainage, and whether the property is located within a Special Flood Hazard Area, requiring flood insurance.
- Boundaries: Easements and whether the property has been surveyed for boundaries.
- Water: Water supply and quality.
- Sewer System: Sewage treatment.
- Construction/Remodeling: Property improvements and permits.
- Homeowner’s Association: Cost and coverage of HOA fees.
- Miscellaneous: Various topics, including lead paint, asbestos, radon gas, pest infestations, and methamphetamine contamination.
Each state has its own requirements for property sellers and specific statutes of limitations. Virginia, for example, follows a different approach. They place the burden on the property buyer to conduct due diligence and identify any defects. The residential property disclosure statement in Virginia explicitly states that the owner makes no representations or warranties regarding the condition of the home; buyers are advised to obtain a home inspection.
Virginia’s disclosure statement also covers adjacent parcels, historic district ordinances, resource protection areas, registered sexual offenders, dam break inundation zones, stormwater detention facilities, wastewater systems, solar energy collection devices, special flood hazard areas, conservation easements, and community development authorities.
Who is Protected by the Statute of Limitations?
When I received the call, two more sales of the house had taken place since Eric’s ownership. The attorney representing the buyers from Eric’s sale was being sued as the seller. The issue arose five years after the sale, so it fell within the statute of limitations. However, Eric’s transaction had occurred over 16 years prior. Even though he failed to disclose the basement flooding, he was protected by the statute of limitations. As his buyers were aware of the flooding through the fire department’s visits, they were liable for not disclosing it.
The attorney attempted to involve Eric in the lawsuit because of his failure to disclose initially. However, Eric successfully used the statute of limitations as a defense. His sale fell outside of California’s statute of limitations for property disclosures; otherwise, he would have been a party to the lawsuit.
The Lesson Learned: Disclose Everything
The key lesson here is to disclose every detail about a property. By doing so, you can avoid relying on a statute of limitations defense! Don’t take any risks; disclose everything upfront to ensure a smooth and transparent real estate transaction.