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REAL ESTATE 53: Complaint filed for violation of Seller Disclosure Act.

Plaintiffs purchased a home in Michigan. At the time of the sale, the owners of the home, defendants, had been suffering from dementia for several months and were living in assisted-living facilities. Their daughter, defendant L, as their power of attorney, filled out the Seller’s Disclosure Statement (SDS) as required by the SDA. According to L’s affidavit, she did so at her attorney’s insistence even though she had lived out of state and knew practically nothing about the home.

Seller Disclosure Act (SDA)

On the SDS, defendant L indicated that the condition of numerous aspects of the home were unknown to her and, despite the SDS’s instructions, she left several questions blank.

Plaintiff filed a complaint against defendants, alleging three separate counts: one for violations of the SDA, one for common-law fraud, and one for silent fraud.

The complaint listed multiple alleged defects that plaintiffs claimed L was required but failed to disclose including water leaks in the basement and multiple roof leaks.

Defendants moved for summary disposition. With respect to the claim alleging SDA violations, defendants argued that the SDA did not create an independent cause of action. With respect to the two fraud claims, defendants argued that plaintiffs were unable to prove numerous elements of their claims.

The trial court granted defendants’ motion.

Seller Disclosure Act (SDA) Violations

Although MCL 565.954(3) and (4) allow a purchaser to terminate a purchase agreement for the sale of real estate before the transfer of title if disclosures are not made as required in the SDS, the SDA provides no other remedy. The SDA does not create an independent cause of action but instead relies on common-law causes of action in fraud.

Common Law Fraud

To prove a claim of common-law fraud, also known as fraudulent misrepresentation, a plaintiff must establish six different elements: (1) the defendant made a material representation; (2) the representation was false; (3) when the representation was made, the defendant knew that it was false, or made it recklessly, without knowledge of its truth, and as a positive assertion; (4) the defendant made it with the intention that the plaintiff should act upon it; (5) the plaintiff acted in reliance upon the representation; and (6) the plaintiff thereby suffered injury.

Unlike a claim of innocent misrepresentation, which does not require proof of intent to deceive by the party making the misrepresentation, a claim of common-law fraud does require proof of an intent to deceive. Here, plaintiffs have shown to no false representation made by L. This is fatal to their claim of common-law fraud.

Silent Fraud

To prove silent fraud, also known as fraudulent concealment, the plaintiff must show that the defendant suppressed the truth with the intent to defraud the plaintiff and that the defendant had a legal or equitable duty of disclosure. Establishing silent fraud requires more than proving that the seller was aware of and failed to disclose a hidden defect.

While good faith and honesty are required when completing an SDS, if at the time the disclosures are required to be made, an item of information required to be disclosed under the SDA is unknown or unavailable to the transferor, the transferor may comply with this act by advising a prospective purchaser of the fact that the information is unknown.

Plaintiffs’ claim of silent fraud fails for the same reasons as their claim of common-law fraud. Plaintiffs failed to offer proof that L suppressed the truth about the conditions in her parents’ home with an intent to defraud plaintiffs.

Skilled Real Estate Litigation in Michigan

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