Failure to Disclose Defects in Sale of Homes

In Georgia, the seller of a home pursuant to a form supplied by a real estate agent can result in a duty by the seller to disclose the existence of problems with the home.  Georgia sales contracts often contain a disclosure statement that the contract incorporates as part of the contractual  promises a seller is making.  When a seller checks, "No" to questions regarding the existence of flooding or other defects in a house contract, the seller may be liable for damages once the buyer moves in and discovers the problem.  For example, in one case decided by the Georgia Court of Appeals, there was evidence that the seller had sold a house that was in a low lying area.   The court noted that the buyers could not have reasonably discovered the existence of a flooding and drainage problem since it would not occur except during rains.  Unless the buyer just happened to be at the house inspecting it during an intense rainfall, the buyer would not have discovered the problem.  The court found that the jury could properly conclude in that case that the seller had an affirmative duty to disclose these facts of which it had superior knowledge. Rose Mill Homes, Inc. v. Michel, 155 Ga. App. 808, 809, 273 S.E.2d 211, 213 (1980).

A common form used by a Georgia realtors association for the sale of residences contains a disclosure statement that a seller signs and delivers to potential buyers in connection with the agreement.  The form has been revised in recent years to include a provision that makes the disclosure statement part of the contents of the sales contract.  See Georgia Realtors Red Book. Accordingly, the buyer who checks, "No" to the question regarding the existence of flooding may be liable for fraud and/or breach of contract where a problem exists.  Fraud can arise where the seller knew of the problem and represented that it did not exist.  See Rose Mill Homes, Inc., supra.  In addition, breach of contract, which is a separate cause of action that does not require the showing of fraud, does not require preexisting knowledge of the problem.  A person who contractually represents a fact as true is responsible for the consequences when the fact turns about to be false -- regardless whether he knew it was false or not.