Disclosure and liability

[Iowayanks]

I sold a home 6 months ago in Southern Louisiana. I disclosed the age of the A/C and Heating unit of 20 years, an old unit. We lived in the house and had no problems with the a/c unit for 5 years other than having to add Freon once and having to unplug the water drain line twice (a common problem in South LA due to Algae growth). The addition of freon once and the unplugging of the drain line I did not mention (disclose) since I consider them to be normal maintenance items. Yesterday I received a bill from the new owners lawyer wanting me to pay for the new cooling heat exchanger which aparrently was leaking, filling the overflow and shutting down the unit. Additionally the repair man claims that some "non professional" repairs had been made to the heat exchanger with a sealant. There was some sort of black sealant on both the pan and the bottom of the heat exchanger but I never thought anything of it knowing the unit was old when we bought the house. The sealant was there when we bought the house. We did not experience leakage at the Heat exchanger and I don't see how I could be liable for the $800. In the letter it states that I was deceptive in not disclosing this problem. Certainly the unit ran prior to June in sweltering South Louisiana so it would seem obvious to me that whatever occurred happened after we were long gone (in other words in must have worked for some time this year before it failed). Also, even if I could be held liable it would seem extremely unequitable for me to pay full price to replace a 20 year old a/c heat exchanger that has served well, long beyond a normal life expectancy. What do I have to do to resolve this. I don't need an expensive legal battle over $800 which makes me wonder what his motives are since it seems to me not to be cost affective for him to take legal action without even contacting me first.

 

[HomeGuru]

<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:</font><HR>Originally posted by Iowayanks:
I sold a home 6 months ago in Southern Louisiana. I disclosed the age of the A/C and Heating unit of 20 years, an old unit. We lived in the house and had no problems with the a/c unit for 5 years other than having to add Freon once and having to unplug the water drain line twice (a common problem in South LA due to Algae growth). The addition of freon once and the unplugging of the drain line I did not mention (disclose) since I consider them to be normal maintenance items. Yesterday I received a bill from the new owners lawyer wanting me to pay for the new cooling heat exchanger which aparrently was leaking, filling the overflow and shutting down the unit. Additionally the repair man claims that some "non professional" repairs had been made to the heat exchanger with a sealant. There was some sort of black sealant on both the pan and the bottom of the heat exchanger but I never thought anything of it knowing the unit was old when we bought the house. The sealant was there when we bought the house. We did not experience leakage at the Heat exchanger and I don't see how I could be liable for the $800. In the letter it states that I was deceptive in not disclosing this problem. Certainly the unit ran prior to June in sweltering South Louisiana so it would seem obvious to me that whatever occurred happened after we were long gone (in other words in must have worked for some time this year before it failed). Also, even if I could be held liable it would seem extremely unequitable for me to pay full price to replace a 20 year old a/c heat exchanger that has served well, long beyond a normal life expectancy. What do I have to do to resolve this. I don't need an expensive legal battle over $800 which makes me wonder what his motives are since it seems to me not to be cost affective for him to take legal action without even contacting me first.<HR></BLOCKQUOTE>

The HVAC unit was clearly an old unit and possibly operating beyond its expected useful life. You do have liability in this matter. You should have sold the home as-is, specifically noting in your sales contract and seller disclosure statement language to the effect of: the HVAC unit is 20 years old and is currently operating but beyond its expected useful life. The Seller is conveying this appliance in "as-is condition with all defects", the Seller will not make any repairs to this appliance nor replace same if there are problems up until closing and anytime after. The Seller has not hired a contractor to inspect this unit and recommends that the Buyer do so at the Buyers own expense. ( or hire a contractor to inspect the appliance, write a report and attach the report to the disclosure statement. Attached is the inspection report from New Orleans HVAC Corp. which is incorporated and made a part of this disclosure statement. The unit is being sold in as-is condition as reflected in the contractors report. The Seller will not replace or make any repairs whatsoever)

It is not the Buyers fault that an unqualified person repaired this appliance when you bought the home. It is now your responsibility. In addition, you failed to disclose material facts about this appliance thinking that you did not have to disclose, due to your own assumption that the work done, you considered as normal maintenance. You did not have a professional inspect the appliance and tell you the facts. The Buyers relied on your silence and therefore were of the understanding that nothing was wrong. So in essence you withheld important information that only you would know and have requisite knowledge of. (albeit minor)

A home inspection or at least an inspection of this appliance by a licensed contractor paid for by either you as the Seller or the Buyer would have helped resolve this situation early on.

Negotiate and in light of the circumstances, you may want to consider paying for half under the condition that the amount is settlement of any and all future claims the Buyer may have against you in the future. Have them sign a hold harmless and indemnification agreement.

[This message has been edited by HomeGuru (edited June 24, 2000).]

 

[Tracey]

HomeGuru, I respectfully disagree with your analysis.

You cannot disclose a condition of which you are unaware. The AC worked fine when you sold the house, & you had no leakage problems. You thought the black sealant was normal, & had no reason to believe otherwise. You had no duty to have every appliance in the house inspected -- that was part of the buyer's home inspector's job.

Whether you unplugged the drain line or added freon is irrelevant. Buyer is complaining about the sealant, not the drain line. Since you didn't know the sealant was "unprofessionally" applied, you couldn't have disclosed it. Therefore, you were not deceptive.

Finally, where a seller fails to disclose a material, non-obvious defect, buyer is entitled to the difference in value between the item buyer thought s/he was getting, & the item B actually got. The value of a 20 year old AC is $0. (Cite the manual and the IRS depreciation guide if you have to.) Therefore, B has no damages. Also, the AC's age was reflected in the price of the house. When pricing the house, you deducted the cost of a new HVAC unit from the asking price. Thus, B has already been compensated for the HVAC's condition via a price discount.

Finally, you disclosed that the AC was 20 years old. (Did you also disclose that you had owned the house for only 5 years?) Either wasy, this was sufficient to put B on notice that the HVAC was suspect & B should have had a specialist look at it prior to closing IF B wasn't already planning to replace it within the next year or two.

Tell B's lawyer that you disclosed the AC's age & that you had no reason to suspect that the "black sealant" was improperly applied, as you had no problems with the heat exchanger or leakage from the sealant. You're not going to pay them anything. Phrase the letter carefully so that you are telling the truth but not mentioning the fact that you had to unblock the drain line from algae growth twice. BTW, I agree with you -- adding freon & cleaning drain lines is routine maintainance. It's like replacing the heating filter every year to cut down on allergens & raise efficiency.

B's lawyer is trying to intimidate you and shake you down for some money. Don't fall for it. I suppose you could offer $100 just to make it go away. That should cover some of the legal fees B paid to have the silly letter written.

------------------
This is not legal advice and you are not my client. Double check everything with your own attorney and your state's laws.

 

[HomeGuru]

<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:</font><HR>Originally posted by Tracey:
HomeGuru, I respectfully disagree with your analysis.

You cannot disclose a condition of which you are unaware. The AC worked fine when you sold the house, & you had no leakage problems. You thought the black sealant was normal, & had no reason to believe otherwise. You had no duty to have every appliance in the house inspected -- that was part of the buyer's home inspector's job.

Whether you unplugged the drain line or added freon is irrelevant. Buyer is complaining about the sealant, not the drain line. Since you didn't know the sealant was "unprofessionally" applied, you couldn't have disclosed it. Therefore, you were not deceptive.

Finally, where a seller fails to disclose a material, non-obvious defect, buyer is entitled to the difference in value between the item buyer thought s/he was getting, & the item B actually got. The value of a 20 year old AC is $0. (Cite the manual and the IRS depreciation guide if you have to.) Therefore, B has no damages. Also, the AC's age was reflected in the price of the house. When pricing the house, you deducted the cost of a new HVAC unit from the asking price. Thus, B has already been compensated for the HVAC's condition via a price discount.

Finally, you disclosed that the AC was 20 years old. (Did you also disclose that you had owned the house for only 5 years?) Either wasy, this was sufficient to put B on notice that the HVAC was suspect & B should have had a specialist look at it prior to closing IF B wasn't already planning to replace it within the next year or two.

Tell B's lawyer that you disclosed the AC's age & that you had no reason to suspect that the "black sealant" was improperly applied, as you had no problems with the heat exchanger or leakage from the sealant. You're not going to pay them anything. Phrase the letter carefully so that you are telling the truth but not mentioning the fact that you had to unblock the drain line from algae growth twice. BTW, I agree with you -- adding freon & cleaning drain lines is routine maintainance. It's like replacing the heating filter every year to cut down on allergens & raise efficiency.

B's lawyer is trying to intimidate you and shake you down for some money. Don't fall for it. I suppose you could offer $100 just to make it go away. That should cover some of the legal fees B paid to have the silly letter written.

<HR></BLOCKQUOTE>

Tracey, thanks for your comments. You have raised some fine points. We can agree to disagree.

For the sake of argument, courts have not only ruled that Sellers disclose conditions about the property that they know about, but also conditions that they should have known about. ( Easton v. Strassburger) In this case, the Seller should have known of the faulty and unprofessional black sealant repair if they completed standards and tasks acting as a prudent home buyer and home owner. At the time of their home purchase a professional home inspection would have revealed the problem. Crcked heat exchangers is very common and the fact that the black sealant was there at the time of the Sellers purchase of the property indicates that the heat exchanger was already cracked and that the crack was repaired incorrectly via the black sealant method. Notwithstanding the fact that the unit is 20 years old and operated with no problems, there was no disclosure to the Buyer that the heat exchanger was cracked and repaired. This is a material defect. Sometime during the 5 year period the Seller should have also had a professional contractor service the unit, in which case the defect would have been discovered. No professional was hired during the entire 5 year period and the Seller took it uon himself to act as his own HVAC unlicensed contractor. HVAC manufacturers recommend that servicing by a professional be completed at least once a year. The Seller is not a qualified HVAC contractor so how would he know if the heat exchanger did not leak and if there were not any other problems. The problem of the sealant defect is easily discoverable and that is why in my opinion, this condition is a material fact that the Seller should have known about. If there were say cracks in the foundation slab which was covered by carpet, then this condition would not be readily discoverable to a Seller. Conditions which are hidden or in an inaccesible area are not considered readily observable and discoverable. In this case the sealant defect was easily discoverable by a professional. While the appliance in fact may have appeared to be in working order consistant with its age at the time of closing, the defect is clearly not a working order and age issue.

While it is true that the Seller is not liable for defects that they had no knowledge of, the Seller can still be held liable for defects they should have known about. I believe that the Seller was not deceptive in this instance but could have done a better job at risk reduction and disclosure.

IAAL, can you please provide your opinion?

[This message has been edited by HomeGuru (edited June 24, 2000).]