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Saiz v. Horn: Buyers' Representative Had Duty to Inform Buyers of Seller's Required Disclosures

South Dakota's highest court has considered whether a buyers' representative has a duty to inform buyers that seller is required by law to turn over a property condition disclosure form.

Craig and Patricia Saiz ("Buyers") contacted Rod Horn ("Buyer's Representative"), a licensed real estate broker, about rental homes in the area. The Buyer's Representative told them about an area home that was listed for sale at what he felt was a below market price. In June 1995, the Buyers made an offer on the property which the owner, Marjorie Dailey ("Seller"), accepted. The Buyers retained an inspector whose report stated that the property was structurally sound and in good condition.

The transaction closed in August 1995. The Seller never gave the Buyers a completed property condition disclosure form, as required by South Dakota law. The Seller had completed a disclosure form earlier and given it to a prior prospective buyer. The Seller's disclosure form indicated that the property had a history of water penetration problems and also cracked walls.

The Buyers experienced no problems with the house until 2000, when they began noticing cracks in certain rooms which kept returning even after the rooms were repainted. They also discovered that there had been prior water penetration into the home. Eventually, it was discovered that the home did not have a concrete foundation, which was causing the west side of the home to tear away from the rest of the home. A contractor estimated that it would cost between $15-20,000 to install a concrete foundation.

The Buyers filed a lawsuit against the Buyer's Representative in August 2001, alleging a breach of fiduciary duty. The Buyers alleged that they would not have purchased the property if they had received the Seller's property condition disclosure form and also that the Buyer's Representative breached his fiduciary duty to them. The trial court ruled that the state's property condition disclosure law imposed no duty upon a buyer's representative, and so entered judgment in favor of the Buyer's Representative. The court also ruled that the Buyers' claims were barred by the statute of limitations. The Buyers appealed.

The South Dakota Supreme Court reversed the trial court and sent the case back to the trial court for further proceedings. The court first looked at what duty, if any, a buyer's representative owed to its client regarding required disclosure forms. The court agreed the state's property condition disclosure statute did not impose any duty upon a buyer's representative, but also found the agency relationship between the Buyer's Representative and the Buyers did impose a duty upon the Buyer's Representative to advise the Buyers about the "rules and procedures involved in a real estate transaction." The court stated that the very reason buyers retain buyer's representatives is to advise them on the particulars of a real estate transaction. Therefore, the court ruled that the Buyer's Representative had a duty to advise the Buyers that the Seller was required to give them a completed property condition disclosure form, and a failure to do so would constitute a breach of fiduciary duty. The court also stated that the Buyer's Representative could be liable for the Buyers' losses if a jury found that the Buyers would not have purchased the property had they received the Seller's disclosure form prior to closing. Thus, the case was sent back to the lower court for further proceedings.

The next issue for the court to consider was when the state's six year statute of limitations ("Statute") began. The trial court had ruled that the Statute began running on the date the Seller accepted the Buyers' offer, or June 1995. Since the lawsuit was filed in August 2001, the trial court had ruled the Statute had barred the Buyers' lawsuit. Looking at the property condition disclosure law, the court found that the Statute allowed a buyer to cancel a purchase three to six days after receiving a late disclosure, meaning that the seller has up until the closing to make a disclosure to a buyer. Thus, the court set the closing date in August 1995 as the date the statute of limitations began to run. Since the lawsuit was filed less than six years from the anniversary of the closing date, the court ruled that the Statute did not bar the Buyers' lawsuit. Thus, the court reversed the trial court and sent the case back to the trial court for further proceedings.

Saiz v. Horn, 668 N.W.2d 332 (S.D. 2003). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information].