By Noah Klug
special to the daily
Must a seller of real estate disclose the property’s defects to a potential buyer? The general rule is caveat emptor (buyer beware). This means buyers are responsible for reasonably investigating what they are buying before buying it. The caveat emptor rule is supported by the language of widely used standard contract forms promulgated by the Colorado Real Estate Commission, which state: “Unless otherwise provided in this Contract, Buyer acknowledges that Seller is conveying the Property to Buyer in an ‘as is’ condition, ‘where is’ and ‘with all faults.’â€
There are, however, limits to the caveat emptor rule and the enforceability of an “as is†contract. Basically, property defects are either “patent†(meaning obvious or easy to determine) or they are “latent†(not obvious or easy to determine). Patent defects are subject to the caveat emptor rule and “as is†language of a contract (so a seller generally doesn’t need to disclose them), but a seller can be liable for latent defects that the seller knew about and failed to disclose. This principle is also reflected in the standard contract forms, which state: “Seller shall disclose to Buyer, in writing, any latent defects actually known by Seller.†There is no bright line rule for what defects are considered latent, but courts have found them to include things like soil conditions, environmental issues or insect infestations…
Published by