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Real EstateTips We've Picked Up Along the Way

The Residential Property Disclosure Form: Practically Useless

By June 19, 2019No Comments

If you’ve purchased or sold residential property, then you’re familiar with Ohio’s residential property disclosure form. You probably relied on it to protect yourself from any kind of water intrusion, tax assessment, or other defect in the house. You really shouldn’t have relied on it.

Illustration of two hands shaking over a house with a "sold" sign

In Ohio, there is NO CAUSE OF ACTION for erroneously filling out a residential property disclosure form. None. Instead, you normally need to prove actual fraud or fraudulent concealment to recover any money at all. It is incredibly rare to succeed on those claims.

 

What is the Residential Property Disclosure Form?

Pursuant to R.C. 5302.30(C), any person who intends to transfer real property must complete and deliver to every prospective transferee a property disclosure form. R.C. 5302.30(E)(1) requires that transferors complete the form “in good faith,” which is defined in R.C. 5302.30(A)(1) as “honesty in fact .” Consistent with the honesty in fact requirement, “[a] transferor of residential real property is not liable in damages in a civil action for injury, death, or loss to person or property that allegedly arises from any error in, inaccuracy of, or omission of any item of information required to be disclosed in the property disclosure form if the error, inaccuracy, or omission was not within the transferor’s actual knowledge.”[i]  Thus, to prevail on a claim based upon information contained in the property disclosure form, a Plaintiff is required to show more than negligence. Instead, you must show actual knowledge of the errors in the form. This is a high bar.

Complicating the residential disclosure requirements is the doctrine of caveat emptor, or “buyer beware”, in Ohio. The doctrine of caveat emptor is designed to finalize real estate transactions by preventing disappointed real estate buyers from litigating every imperfection existing in residential property.[ii] The rationale underlying the doctrine is that “a party has no right to rely on certain representations regarding the property when the true facts are equally open to both parties.” Under the doctrine of caveat emptor, a purchaser cannot prevail on a claim based upon a defect in real estate if (1) the condition complained of is open to observation or discoverable upon reasonable inspection; (2) the purchaser had the unimpeded opportunity to examine the premises; and (3) there is no fraud on the part of the vendor.[iii]

Note that EVEN IF THERE IS FRAUD, if the condition complained of is open to observation or discoverable, you can’t recover. That means that if your home inspector should have discovered the defect, and didn’t, you STILL can’t sue the home seller for intentionally misleading you about the defect.

Illustration of a hand holding a magnifying glass over a paper

 

The Importance of a Good Home Inspector

So what about the inspector, you may ask? If they missed the defect surely you can just go after them instead of the home seller, right? Maybe, but it probably isn’t worth it. Common in-home inspection agreements are limitations of liability clauses which, so long as they aren’t paired with an arbitration clause, are enforceable.[iv] This means that if the inspector limits your damages in a suit to the cost of the inspection, and not the cost to replace the roof he told you was fine, then all you can recover is the cost of the inspection.

Home buyers may also be surprised to know the very, very low competency requirements placed on home inspectors in Ohio. Indeed, there aren’t any written standards under Ohio law. Instead, most Ohio home inspectors adhere to the standards of the American Society of Home Inspectors (“ASHI”), a purely private organization, in their contracts. On its face, that could be ok, if not for the incredibly vague standards set out by ASHI for home inspections. Indeed, the standards do not even establish how an inspector should conduct inspections.

Let’s take roofing, for an example. Under ASHI standards, to inspect a roof an inspector must inspect roofing materials, roof drainage systems, flashing, skylights, chimneys and roof penetrations, and describe roofing materials and methods used to inspect the roofing.[v] Inspect is defined as: “The process of examining readily accessible systems and components by (1) applying this Standard, and (2) operating normal operating controls, and (3) opening readily openable access panels.”

That’s it. That’s the whole rule. Missing from that is 1) how to conduct the inspection, 2) what methods should be used for the inspection, 3) how long the inspection should take, and 4) how thorough does it need to be. If the home buyer brings an action against an inspector, they have quite an uphill battle to prove the inspector was negligent.

 

The takeaway? The residential home disclosure form is mostly useless for someone relying on it to actually know what is wrong with a house, and certainly nearly impossible to rely on to bring a claim against a home seller for failing to appropriately complete it. Spend your time and energy instead on getting a home inspection from someone who actually knows what they’re doing, and not trusting the disclosure document given to you by the seller.

 

 

This article is meant to be utilized as a general guideline for understanding Residential Property Disclosure Forms. Nothing in this blog is intended to create an attorney-client relationship or to provide legal advice on which you should rely without talking to your own retained attorney first.  If you have questions about your particular legal situation, you should contact a legal professional.

Nick Weiss of The Gertsburg Law Firm can be reached at 440-528-1233 or [email protected].

 

Are your policies and documents protecting your business or getting you sued? Check 10 areas of your business for legal risks and get instant feedback from experienced attorneys right now by taking a short Business Vulnerability Quiz at www.gertsburglaw.com/business-vulnerability-quiz.

 

 

[i] R.C. 5302.30(F)(1).

[ii] Layman v. Binns (1988), 35 Ohio St.3d 176, 177.

[iii] Id.; Bell v. Perkins (1997), 124 Ohio App.3d 539, 541.

[iv] Barto v. Boardman Home Inspection, 2015-Ohio-5210, ¶ 19.

[v] ASHI rule 5.1 (https://www.homeinspector.org/Roof-system).

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