Agent Duty to Disclose Known Defects in a Home

Case Study:

This week we continue with a series of emails that will continue over the next several weeks where we will analyze Louisiana Court cases dealing with the duties of real estate agents and how agents breached their duties in some of those cases.

Hopefully, the readers of this email will learn more about what duties are placed on Louisiana real estate agents and how not to breach those duties.

This week, we will discuss below a Louisiana 4th Circuit Court of Appeals case dealing with an agents’ failure to disclose a defect known to her.

Leflore vs. Anderson, et al., 537 So.2d 215 (La. App. 4th Cir., Sept. 16, 1988)

Plaintiff purchased a house for $55,500.00. The listing agent previously owned the house for thirteen (13) years prior to the current sellers.   After plaintiff moved into the house, she began to notice the floor was sinking in certain places, cracks in the wall which became more apparent and more numerous, and one day the bathroom wall split open.

Plaintiff sued sellers and their real estate agent requesting damages, rescission of the sale of property and return of the purchase price to her.   Plaintiff alleged sellers and their real estate agent knew of and intentionally concealed foundational defects from plaintiff prior to the act of sale.  Sellers and their listing agent contended they were unaware of foundational defects prior to the act of sale.

At trial, a general contractor, who inspected the house, testified that several cracks in the inside walls had been previously patched.  The same general contractor and another foundation repair contractor testified that the foundational defects began before plaintiff bought the house.

Trial Court found that the above testimony supported the conclusion that sellers and their listing agent knew of and intentionally concealed the foundational problems of the home.  Sellers and their listing agent appealed.

According to the Louisiana 4th Circuit Court of Appeals, Negligent misrepresentation occurs when there is a legal duty to supply the correct information and a breach of that duty resulting in damages to the plaintiff.

In this case, the Trial Court found that the listing agent intentionally concealed the property’s existing defects from the plaintiff and the 4th Circuit Court of Appeals agreed Trial testimony that cracks in the wall of the house had been previously patched and that the house basically began to fall apart only months after its purchase indicated Sellers and the listing agent knew of and intentionally concealed the foundational problem of the home.

As a result, the 4th Circuit Court of Appeals upheld the finding that the listing agent was iable to plaintiff for negligent misrepresentation.

A couple of comments about this case:

  1. Circumstantial Evidence can be used to impute knowledge:  In this case, defendants specifically denied knowledge of foundational problems.  However, the facts and circumstances suggested otherwise;
  2. Disclosure of defects:  Since the listing agent was a prior owner of the home, she had a duty to disclose any defects known by her.  This is important because agents often times list property for family and friends.  If an agent has personal knowledge of a defect in a home, the agent should disclose that defect.

For any questions concerning this email, please contact me at rye@tutentitle.com.

H.L. “Rye” Tuten, III, is a Title Attorney/Real Estate Closing Attorney and Owner of Tuten Title & Escrow, LLC. Formerly assigned by RICE Insurance to defend real estate agents throughout Acadiana, much of his more than nine years’ litigation experience is with real estate concerns.

The information contained herein is simply for informational purposes only and not intended to provide legal advice or create an attorney-client relationship.