A couple bought a new house from the contractor. The lot had a steep slope, and to control drainage and erosion, the contractor had built terraces and retaining walls and had contoured the site to direct drainage away from the house. The property had been listed with a real estate brokerage firm, and two of its sales associates (the “Sales Associates”) handled the sale. Subsequent to the closing, the drainage system failed and the buyers experienced excessive rainwater runoff and erosion problems.
The buyers sued the contractor and the Sales Associates, claiming that the Sales Associates were aware of serious erosion problems at the property prior to and during construction of the house, but did not tell the buyers. Deckert v. Foster. The trial court ruled for the Sales Associates on their motion for summary judgment and the buyers appealed.
On appeal, the buyers argued that the Sales Associates passively concealed the problems. Passive concealment is a type of fraud. To show passive concealment, the purchaser must prove that concealing the defects “was an act of fraud and deceit, including evidence that the defect could not have been discovered by the buyer in the exercise of due diligence and that the seller or agent was aware of the problems and did not disclose them.”
In a favorable decision for the real estate professionals, the Court of Appeals of Georgia affirmed the lower court decision. First, it found that the Sales Associates were not required to tell the buyers that the property was prone to water runoff and erosion if proper drainage control systems were not installed. The court stated that the steep slope of the property put the buyers on notice; “any prospective buyer should have known that runoff would occur unless proper drainage control systems were installed.”
Second, the court found that erosion problems on the property prior to the completion of the drainage control systems were not sufficient to make the Sales Associates aware that there would continue to be drainage and erosion problems at the property after the systems were in place. Since the prior problems did not put the Sales Associates on notice of a defect in the drainage control systems (which had yet to be completed at the time), the court held that they did not knowingly conceal any such defect from the buyers. There was no evidence that the Sales Associates knew that the erosion control systems were defective.
Deckert v. Foster, 230 Ga.App. 164, 495 S.E.2d 656 (Ga. Ct. App. 1998).