What if I purchase a home “as-is” and later discover latent defects that are significant and expensive to repair?
Buyers can submit to mediation through Maryland REALTORS® to recover damages associated with latent defects not disclosed at the time of sale.
In the State of Maryland, the standard Residential Contract of Sale form used by Maryland REALTORS® includes a provision that allows for mediation of disputes arising out of the sale and purchase of a residential property. Mediation is a process where parties attempt to resolve a dispute without, or before the filing of a lawsuit with the assistance of a neutral mediator. When a buyer of residential property discovers a latent defect after purchasing property and it is clear the seller knew about said defect and failed to disclose it to the buyer, mediation through Maryland REALTORS® can be an effective process to achieve a resolution. A copy of the Residential Contract of Sale form can be found here: https://www.mdrealtor.org.
What is a latent defect?
In Maryland, a “latent defect” in residential property is a material defect that the seller knows about and (1) is not visible, (2) could not be reasonably expected to be uncovered by the buyer before the purchase is made, and (3) could endanger the health or welfare of the buyer.
A “material defect,” as encompassed in the term latent defect, is a significant issue with a residential property’s system or structure that adversely affects the property’s value, poses a health or safety risk, or undermines the buyer’s capacity to enjoy it. Notably, a material defect is a substantial problem, as opposed to a minor or aesthetic issue. Examples of material defects include, but are not limited to:
- Major structural issues or other decay in the property’s architecture, including damaged foundation, sloped floors, bowed walls, or horizontal cracks.
- Significant roof or basement leaks that require extensive repairs.
- Outdated and malunctioning plumbing or electrical issues that make the property unsafe.
- The presence of asbestos, lead paint, mold, or other hazardous materials.
As you can see from the above examples, these material defects would not be visible or expected to be uncovered by a buyer before purchasing the property, and all pose significant health and safety risks.
Does a seller have a duty to disclose latent defects, even if the property is being sold “as-is”?
Yes, sellers of residential property, even if it is being sold “as-is,” have a duty in Maryland to disclose any latent defects of which the seller had actual knowledge and that a buyer (or the buyer’s home inspector) could not reasonably expect to find by a visual inspection and pose a direct threat to health or safety of the buyer. While a seller can still indicate that the property is being sold “as-is,” the seller is still required to indicate latent defects by completing the Maryland Residential Property Disclosure and Disclaimer Statement, which is included in the Residential Contract of Sale form used by Maryland REALTORS®.
What if the seller failed to disclose a latent defect and as a result, I now have significant and expensive costs to repair the property?
Our office can help you review the contract of sale to determine if you are eligible for mediation with the Maryland REALTORS®. Importantly, all claims or disputes between a buyer and seller must be submitted to mediation with the Maryland REALTORS® within one year following the closing date of the sale, so you should not delay in contacting an attorney. If a latent defect is discovered after one year, you may still have legal recourse. In Maryland, the standard statute of limitations to file a claim is three years, so if you miss the one-year mediation deadline, you should still contact an attorney to determine if you have a viable claim.
Can I skip mediation offered by Maryland REALTORS® and immediately file a lawsuit in court?
Mediation is generally faster, simpler, and often less expensive than litigation. However, mediation is a voluntary process that must be agreed to by the buyer and seller. Under certain circumstances, you may choose to bypass the mediation and immediately file a lawsuit in state court. However, the Maryland Residential Contract of Sale expressly states that if you file a lawsuit in state court and ultimately lose, you will be responsible for paying the other party’s attorneys’ fees, in addition to your own. Our office can provide advice regarding whether you should proceed with mediation or litigation based on the unique facts of your case.
If you need assistance with reviewing a Maryland Residential Contract of Sale and/or believe you have a dispute or claim to submit to mediation with Maryland REALTORS®, please do not hesitate to contact us by phone or e-mail:
Maryland Business Litigation Lawyer Blog
