Our state follows the “caveat emptor” rule for real estate transaction. Under this “buyer beware” rule, the buyer of real estate has the sole responsibility to discover defects in a property’s condition before consummating a real estate transaction. However, there are three exceptions to Alabama’s caveat emptor rule.
Fiduciary relationship
If there is a fiduciary relationship between the buyer and seller, the seller is required to disclose any known defects to the buyer. A fiduciary relationship refers to a relationship where the seller has a duty to act in the buyer’s best interests. This can be established through a verbal or written agreement, and Alabama courts determine whether a fiduciary relationship exists between buyers and sellers on a case-by-case basis.
Health and safety defects
If the seller knows about material defects in the property, but those defects are not readily apparent and they pose a health or safety risk to the buyer, the seller must likely disclose those known material defects. To qualify for this exception though, the seller or the seller’s agent must (1) know about the defect, (2) the defect must be material, (3) the defect must affect health or safety and (3) the defect cannot be readily observed by the buyer. If the seller fails to disclose these health and safety defects, they could be liable for damages. Of course, the seller does not have an obligation to inspection for these defects.
Direct questions
Finally, if the buyer asks direct questions about specific defects and conditions, the seller must honestly answer those questions. This means, the seller must disclose known problems if the buyer directly asks about those known problems. If the seller fails to do this, they could be held liable for damages.
The consequences
If a seller is found guilty of not disclosing a defect that they had a duty to disclose, like termite damage or an active termite infestation, the seller will be held liable. This could mean voiding a home sale, being held liable for the repair cost and even mental anguish and punitive damages. This is why it is so important for Mobile, Alabama, residents to contact an attorney immediately when an undisclosed defect, like termites, is found.
