Considered to be challenging in its prosecution and elusive in successfully being awarded damages, proving fraud against a seller in the residential real estate context is one of those legal situations that a litigator or fraud lawyer in San Antonio doesn’t necessarily look forward to with much relish. But not all hope is lost, the Legal Intelligencer says, pointing to analyses of recent cases that outline useful factors in litigating such cases and “types of claims that should be considered.”
Like in Pennsylvania, where the Legal Intelligencer is based, a fraud lawyer in San Antonio knows that failure-to-disclose cases can continue to be litigated in Texas, established in particular by the Texas Supreme Court as to real estate in Smith v. National Resort Communities in 1979. So what does it mean, exactly? It means that sellers better get their facts straight when disclosing potential defects about residential real estate property or situations within the property that could detract from the overall value.
The October ruling in Pennsylvania that provides insight into and an example of proving seller fraud was almost comical for the circumstances in the case. Improvements made by the sellers during their ownership of the property under contract included “the conversion of a barn on the site into multiple apartment units and alterations to the wastewater system.” Living in a converted-barn-apartment sounds quaint and fun, right? (Downright adorable). It was a major draw for the buyers, who were informed that with tenants already under lease, the units were income-producing. What a great deal.
But for someone like attorney Douglas Shumway who practices in Texas real estate law, or another fraud lawyer in San Antonio reading this story now, they can already anticipate the trouble that’s coming. “Post settlement, an issue arose with the tenants, and inspection exposed several violations.” Zoning violations galore, since “the property had never been zoned for multiple rental units,” making the promised income-producing structure now virtually useless. The buyers “sought zoning relief,” which was contingent upon inspections, and these revealed…(cringe)…non-compliant sceptic systems for the dwelling units. The additional alterations required for the wastewater system to assume zoning compliance cost the new buyers a whopping $40,000.
So the buyers sued, as any good fraud lawyer in San Antonio would have advised in a similar Texas-based situation. “Notably, at the bench trial, the sellers stipulated to the fact that they knew permits were required and intentionally did not obtain them,” and that on their disclosure form, had explicitly stated that they were “unaware of any material defects on the property.” Which were pretty big mistakes for the sellers, as far as fraudulent-type-stuff goes. Since “material defects” are defined as anything that “would have a significant impact on the value of the property,” and the barn-apartment-zoning-and-wastewater-snafu falls pretty much exactly into that category, it’s not very surprising that the court awarded damages. (In the amount of $20,126 in attorney fees—for details on why that amount was awarded, the link to the Legal Intelligencer goes into more technical details).
Shumway and other Texas real estate attorneys know good and well how important seller disclosure forms are in contracting a sale. This case is just another example of how not to screw up.