Wednesday, February 06, 2008

Sweet...another Way for a Buyer to Terminate a Contract!!

Saw this interesting case (Muir v. Merano, No. 5-06-0626, IL 5th) recently interpreting provisions of the Residential Real Property Disclosure Act...a case of first impression looking at a Buyer's ability to terminate a contract when a Seller didn't provide the required disclosures. The full case is a MUST read if you're involved in Disclosure Act litigation and/or in residential transactions.

So the Act essentially provides that a Seller of residential property (4 or less units) is required to disclose information regarding 22 items as listed in section 35 of the Act. We've been involved in litigation regarding misrepresentations on the disclosure...it's a nice Act to sue under because there are attorney fee shifting provisions, although the statute of limitiations is only 1 year. However, the above case did not deal with the "typical" case; it dealt with a Buyer's right to terminate the contract when Seller did not provide the required disclosures. This right is covered by section 55 of the Act:

Sec. 55. Violations and damages. If the seller fails or refuses to provide the disclosure document prior to the conveyance of the residential real property, the buyer shall have the right to terminate the contract. A person who knowingly violates or fails to perform any duty prescribed by any provision of this Act or who discloses any information on the Residential Real Property Disclosure Report that he knows to be false shall be liable in the amount of actual damages and court costs, and the court may award reasonable attorney fees incurred by the prevailing party. (Source: P.A. 90‑383, eff. 1‑1‑98.)

In the case above, it was unique in that the Buyers moved into the property pre-closing and it was during this period that they actually discovered some of the "defects" in the property. They made numerous pre-closing requests to the Seller to produce the required disclosures but he did not comply. Prior to closing on the property, the Buyers terminated the contract and sought return of their $10k earnest money...that was the eventualy judgment, $10k plus court costs.

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