A seller may not conceal known defects of the purchase property. If a seller knowingly or recklessly makes false statements to induce the buyer to act upon the statements, and the buyer justifiably relies on the statements, acts upon them, and suffers injury as a result, the buyer can establish a cause of action for fraudulent misrepresentation. The Indiana Real Estate Commission has adopted the Seller's Residential Real Estate Sales Disclosure form that sets forth disclosures to be made by the seller of residential real estate at the time of sale. See 876 IAC 1-4-2 and IC 32-21-5-7 for an example of the form. In Indiana, residential real estate sales disclosures generally apply to any sale, exchange of, an installment sales contract for, or a lease with option to buy residential real estate that contains four (4) residential dwelling units or less. IC 32-21-5-1(a). The seller's disclosure of the sewage system's condition is a required disclosure under IC 32-21-5-7. The form states that the information contained in the Sales Disclosure is made to the best of the Seller's "current actual knowledge."
However, IC 32-21-5-11 provides that the owner is not liable for any error, inaccuracy, or omission if the error, inaccuracy, or omission was based on information provided by another person with a professional license or special knowledge who provided a written or oral report or opinion that the owner reasonably believed to be correct and the owner was not negligent in obtaining information from a third party and transmitting the information. Therefore, if the seller hired the inspector and justifiably relied on this information, the seller is not responsible for the repairs of the septic system.
On the other hand, the law only requires that the buyers be provided a reasonable opportunity to inspect the property prior to the purchase of the residence. If the buyers took advantage of this opportunity and hired an inspector, then the buyers no longer relied on the representations of the seller, and no case for fraudulent misrepresentation can be brought against the seller.
-- Michael T. Sawyier
