What are the laws that govern used residential property purchases and sales in Virginia? What happens if the seller does not disclose a serious structural defect with the property before selling it to an unsuspecting buyer? What is the extent of the investigation or due diligence that a buyer must conduct before consummating a sale? Does a buyer who has been defrauded by an unscrupulous seller have any legal recourse under such circumstances? What are the respective rights and duties of sellers in a standard Virginia residential home purchase and sale transaction?  Such questions often arise in the following situations:

• Seller sold the buyer a property where the foundation is defective and cracking or sinking into the ground;
• Seller covered up or concealed mold in the property with fresh paint and drywall;
• Seller covered up extensive termite damage throughout the house before the sale;
• Seller lied to the buyer about some material aspect of the transaction that the buyer relied upon

This article will examine and analyze some of these issues, and illustrate how Virginia Courts have generally interpreted and applied the Caveat Emptor standard.

Virginia is a caveat emptor (buyer beware) state. This essentially means that the responsibility for conducting a thorough inspection of the property that is contemplated to be purchased is on the Buyer. In other words, absent any fraud or concealment of defects with the Property by the seller, the buyer is usually responsible for defects that are uncovered with the property after the settlement date, that is, after the property has been purchased. Stated differently, a seller of real estate in Virginia generally has no duty to disclose all known and reasonably discoverable defects, especially when the sale is AS IS.

What Is Required From Virginia Buyers?

The Virginia Supreme Court has defined the standard of due diligence on buyers as “such a measure of prudence, activity, or assiduity, as is properly to be expected from, and ordinarily exercised by, a reasonable and prudent man under the particular circumstances; not measured by any absolute standard, but depending on the relative facts of the special case.” see STB Marketing, 240 Va. at 144, 393 S.E.2d at 397 (quoting Black’s Law Dictionary 411 (rev. 5th ed.1979)). Thus, absent any agreement to the contrary, “the vendor of land was not liable to his vendee, or a fortiori to any other person, for the condition of the land existing at the time of transfer.” Restatement (Second) of Torts § 352 (1965) (comment a).

This does not mean, however, that the seller has a license to misrepresent or conceal any latent defects (that is, defects not known or visible upon a reasonable inspection) with the property. This was the holding in the Virginia Supreme Court case of Armentrout v. French, 220 Va. 458, 258 S.E.2d 519 (1979), where the seller made certain misrepresentations regarding the home’s septic system to divert the buyers investigation. However, the system was defective and emitted a strong odor in the house, which the sellers concealed through various means. The Virginia Supreme Court poignantly observed in Armentrout that, “[A] very important exception to that rule is that the seller ‘must not say or do anything to throw the purchaser off his guard or to divert him from making the inquiries and examination which a prudent man ought to make.’” Id at 466 (1979) (quoting from Horner v. Ahern, 207 Va. 860, 864, 153 S.E.2d 216, 219 (1967).  Accordingly, if the seller does engage in such misrepresentations or concealment, then the buyer may have a basis to sue for breach of contract, rescission, and/or fraud, and may even seek punitive damages depending upon how bad the conduct was. In Virginia, punitive damages are capped at $350,000. See our related post on What Is Fraud Under Virginia Law here.

Virginia Residential Property Disclosure Act (Va. Code § 55.1-517 et seq).

Virginia’s Residential Property Disclosure Act Va. Code § 55.1-700 to 55.1-714 (hereinafter, “the “VRPDA”) is a statutory scheme enacted by the General Assembly of Virginia that requires a seller of real estate in Virginia to “furnish to a purchaser a residential property disclosure statement for the buyer to beware of certain matters that may affect the buyer’s decision to purchase such real property” Va Code 55.1-703. This act applies to “transfers by sale, exchange, installment land sales contract, or lease with option to buy of residential real property consisting of not less than one nor more than four dwelling units…” VRPDA § 55.1-701. You can read more on this statute here. These disclosures can be accessed via the Department of Professional and Occupational Regulation (DPOR) website.

The function of this disclosure is to put the buyer on notice that the seller does not make any representations about certain conditions related to the property – meaning they don’t have to necessarily disclose any information about such defects and it is the buyers duty to exercise the required due diligence. For example, the VRPDA § 55.1-703 B.1. states that,

Virginia Code Sec. 55.1-703 B.1. Required Disclosures for Buyer To Beware; Buyer To Exercise Necessary Due Diligence.

The owner makes no representations or warranties as to the condition of the real property or any improvements thereon, or with regard to any covenants and restrictions, or any conveyances of mineral rights, as may be recorded among the land records affecting the real property or any improvements thereon, and purchasers are advised to exercise whatever due diligence a particular purchaser deems necessary, including obtaining a home inspection, as defined in Va Code § 54.1-500, and a residential building energy analysis, as defined in Va Code § 54.1-1144, in accordance with terms and conditions as may be contained in the real estate purchase contract, but in any event prior to settlement pursuant to such contract;

Once you sign this statement and complete the sale, the seller is protected from most defects you discover that you may have not properly investigated before buying the home.

To summarize, in Virginia it is mostly up to buyers to inspect the home and negotiate any necessary repairs to be made to the property before purchasing it from the seller. As you sign a purchase contract, there is a Home Inspection contingency period during which the buyer must take certain steps to investigate the condition of the property. To fully protect your purchase, you should:

• Ensure that you have hired proper professionals, like a licensed contractor or home inspector to examine the property;
• Carefully negotiate any inspection contingencies in your sales contract , which will allow you to void the contract if the results of the home inspection contingency are not satisfactory to the buyer;
• Talk to the people who may know about the history of the property, including investigating the relevant land records
• Hire licensed inspectors or contractors to repair any defects discovered during the home inspection process.

For more information, please feel free to contact Fox & Moghul for a specific discussion regarding your case.

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