A real estate agent obtained a listing on a five-bedroom house and requested a completed property condition disclosure statement from the empty-nester owners. However, they missed something vital that later caused trouble for the buyers.
Problem
The septic system was sufficient for the needs of the sellers but not for the buyers’ large family. Nearly a year after the buyers took possession of the property, the septic system malfunctioned and backed up into the finished basement.
Mistake
The agent advertised the home as having five bedrooms, which it did, but the septic system was only permitted and designed for a three-bedroom home.
Result
The buyers hired an engineering firm which provided an estimate detailing the need to build a new system that would satisfy the legal requirements for five-bedroom occupancy. After re-reviewing their closing documents, the buyers discovered the misrepresentation. They hired a lawyer to file suit against the agent and sellers alleging false advertising while seeking the cost of an upgraded septic system and damages equal to the property’s diminution in value.
Prevention
Brokers and agents must be aware of bedroom and occupancy limits in the sale or rental of all properties requiring on-site sewage disposal systems. Information on septic capacity or occupancy can usually be obtained in public records held by the health department. The intentional or negligent misrepresentation of occupancy limits on a property served by a private sewage system violates license law and will likely result in civil litigation and disciplinary action by the real estate commission.
It should also be noted that in some states local laws require an inspection of private septic systems in order to transfer property. Selling agents in those states should be aware of this to avoid future litigation.
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The purpose of this article is to inform and insulate real estate professionals from potential monetary claims and professional grievances. The fact patterns are from actual claims against real estate agents. While the author is an experienced claims representative, the opinions expressed herein are general in nature, not fact nor state specific; and therefore, should not be taken as a substitute for legal advice from an attorney licensed in your state. This article was produced in conjunction with AXA XL and is not to be taken as legal advice.