Daily Development for
Thursday, November 12, 1998

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

I suspect that our Virginia brokers friends will be surprised by this case, and would assume that they would have an obligation to disclose this information. Do the new disclosure statutes alter the consequence of this case in Virginia or elsewhere?

VENDOR/PURCHASER; MISREPRESENTATION; PARTIAL DISCLOSURE: A seller does not have an affirmative duty to provide a purchaser with a copy of a public document and to advise purchaser of the use restrictions noted thereon.

Norris v. Mitchell, 495 S.E.2d 809 (Va. 1998).

Contract of purchase and sale of residential property was contingent upon a satisfactory septic inspection report. Sellers' agent arranged for the performance of the septic inspection. The inspector provided a written report that the septic system was not operating properly.

Upon being notified of the results of the inspection, Purchasers required that the septic system be repaired before settlement. Sellers' agent employed the inspector to make the necessary repairs. The inspector obtained a construction permit from the County that provided, "recommendations: summertime use, no laundry, aerated faucets, low flush toilets[.] conserve water."

After the inspector completed the repair work, the County inspected and approved the septic system. Purchasers were not given a copy of the permit, nor were they told prior to closing of the reservations noted on the permit. Purchasers had advised Sellers' agent that they planned to have their son occupy the house "year round." Promptly after Purchasers' son began living in the house, he had problems with the septic system.

When Purchasers asked Sellers' agent about the repairs that were done to the septic system, Agent sent them a copy of the construction permit containing the subject restrictions. Purchasers alleged that Sellers were guilty of fraud by concealing the reservations noted on the septic permit and that Purchasers had a right to expect disclosure of such information.

The court noted that existing case law requires either an allegation or evidence of a knowing and deliberate decision by a seller not to disclose a material fact. In this case, though, there was no allegation of such a deliberate decision to conceal. The construction permit was an official record that was available for inspection by the public and required to be posted on the property before the work began. Purchasers did not allege that Sellers made any attempt to divert them from inspecting the permit. The court concluded that Sellers did not have an affirmative duty to call such restrictions to the attention of Purchasers.

Comment 1: Note that the system here was not in violation of any public regulation. Had that been the case, the seller might have been liable under the theory that there is an implied warranty that the property meets the public regulatory standards applicable to its current use.

Comment 2: Note also that there have been cases in sellers or their agents or attorneys have provided "halfway" information, and have been viewed as implicitly representing that there was no other relevant information on the point.

For instance, In Petrillo v. Bachenberg, 655 A.2d 1354 (N.J. 1995) the Daily Development for May 4, 1995, a landowner had conducted numerous percolation tests on its property. Most of them failed. In a series of separate testing incidents, only two of thirty tests were successful. Only two successful tests were necessary to obtain a building permit, but of course the history of unsuccessful tests indicated that the property presented major problems for anyone wishing to install a septic tank system.

In response to a request for information on percolation tests, an attorney sent data disclosing the two successful tests and five unsuccessful tests. The attorney had the balance of the information on the other tests, but did not forward it. This was held to be an actionable misrepresentation.

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