By Greg George, Attorney

Coeur d’Alene, Idaho, August 2, 2017. Buying a house or other real property is often one of the highlights of American life. The home can represent not just a stable foundation for a family’s life, but also can be a key part of future financial planning. Purchasing real property for a home or other purpose is a decision that is crucial to get right.

Unfortunately, buying a house can be a very complex process. Some of the most disruptive issues become known after a sale closes, when homeowners may discover issues with the house they did not know about beforehand.

Depending on the facts of a specific case, there are numerous Idaho laws that might apply in those situations. This series will discuss some of those laws. Specifically, it will discuss: (1) the Idaho Property Condition Disclosure Act; (2) common-law[1] fraud; (3) common-law mistake; and (4) some other potential legal claims.

PART 1: The Idaho Property Condition Disclosure Act

Idaho’s Property Condition Disclosure Act (“PCDA”) is found in the Idaho Code (“I.C.”) at title 55, chapter 25. The PCDA requires that sellers[2] of one (1) to four (4) dwelling units disclose certain facts about the property to the best of their knowledge before the sale closes. I.C. § 55-2504. The PCDA does not apply to sales of vacant, commercial, or agricultural land.

Further, not all one-to-four unit residential transactions are subject to the PCDA. Idaho Code section 55-2505 lists sixteen (16) transactions that are exempt from the PCDA’s requirements. These include, among others, transfers from one co-owner to another co-owner, transfers between former spouses ordered by a divorce decree, and transfers from a decedent’s estate. I.C. § 55-2505(8), (10), (16).

For transfers of real property not exempt from the PCDA, the seller must disclose certain information about the property before closing. The required disclosures are listed in the form set out in Idaho Code section 55-2508. These include disclosures about the physical condition of the property (e.g., any problems with the foundation, drainage, septic, etc.), issues affecting title to the property, and other problems the seller knows about concerning the property. I.C. § 55-2508(5), (6), (9).

This disclosure form has some disclaimers for the seller. The seller must, to the best of his or her knowledge, make the required disclosures as of the date the seller signs the form. I.C. § 55-2508. The seller must make the disclosures in good faith. Id. But neither the seller nor the seller’s agents are liable for any error, inaccuracy, or omission on the disclosure form that was: (1) not within the seller’s personal knowledge; or (2) that was based on information about the property provided by public agencies or professional inspectors. I.C. § 55-2511.

The disclosure form states further that “[o]ther than having lived at or owning the property, the Seller possesses no greater knowledge than that which could be obtained upon a careful inspection of the property by the potential buyer.” Id.

The disclosure form “is not a substitute for any inspections. Purchaser is encouraged to obtain his/her own inspections.” Id. The disclosure form “is not a warranty of any kind by the Seller or by any agent representing any Seller in this transaction.” Id. And the form states “[u]nless otherwise advised, the Seller has not conducted any inspection of generally inaccessible areas such as the foundation or roof.” Id. After delivering the disclosure form to the buyer, the seller can amend it if the seller discovers any information on the original form has changed. I.C. § 55-2513. Additionally, sellers are not liable for information that becomes inaccurate after they disclose it. I.C. § 55-2512.

In other words, sellers must make the required disclosures to the best of their knowledge, but buyers should still either hire or perform their own inspections before purchasing. A seller has not necessarily violated the PCDA just because the buyer later discovers an undisclosed defect.

The seller must provide the disclosure form to the buyer within ten (10) days of accepting the buyer’s offer. I.C. § 55-2509. If the buyer objects to any of the disclosed information, the buyer can rescind the purchase by delivering a notice of rescission to the seller within three (3) business days following the date the buyer received the disclosure form. I.C. § 55-2515. If the seller does not receive the buyer’s notice of rescission within that three-day period, the buyer’s right under the PCDA to rescind the purchase is waived. Id.

In a notice of rescission, the buyer must specifically identify the disclosure(s) about the property to which the buyer objects. Id. If the buyer rescinds the purchase under the PCDA, the seller must return the earnest money deposit. Id.

As mentioned previously, the seller has to complete the disclosure form in good faith. I.C. §§ 55-2508; 55-2516. If a seller “willfully or negligently” violates the PCDA or fails to meet any of its requirements, the seller will be liable for the buyer’s resulting actual damages. I.C. § 55-2517. However, no sale subject will be invalidated solely because of a seller’s failure to comply with the PCDA. Id. To rescind a sale after the three-day period under the PCDA discussed above, the buyer will need to make other legal claims. Will

The PCDA does not bar other legal claims. The PCDA’s required disclosures “[do] not limit and shall not be construed as limiting any obligation to disclose an item of information that is created by any other section of the Idaho Code or the common law of the state of Idaho.” I.C. § 55-2514.

In addition, if a seller misrepresents or fails to disclose information about a property, or if a genuine mistake is made regarding an attribute of the property, a buyer may have claims under the common law in addition to the PCDA. In the next blog post, we will look at the first of two common-law claims that may come up if the seller misrepresents or does not disclose information about the property: fraud.

Note: This post is not legal advice, and should not be relied upon as such. Different sets of facts will likely lead to different legal conclusions. If you need assistance with real property matters, call Macomber Law, PLLC for a forty-five minute, no charge consultation to see if we can help.

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[1] “Common law” refers to “the body of law derived from judicial decisions, rather than from statutes or constitutions[.]” Black’s Law Dictionary 334 (10th ed. 2014). The common law applied by American courts is based on historical decisions of English courts, many of which date back centuries. Specifically, many areas of American law—such as torts or contracts—are largely based on the common law, which is in many circumstances the rule of decisions made in Idaho courts, see I.C. § 73-116.

[2] In addition to sales, the PCDA also applies to exchanges, installment sale contracts, leases with an option to purchase, other options to purchase, and ground leases coupled with improvements. I.C. § 55-2504. For simplicity, transferors of real property are referred to in this article as “sellers.”