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Fraudulent Concealment In Real Estate Transactions

By Amar S. Weisman, Esquire

What Is Fraudulent Concealment?

Fraudulent concealment is a cause of action that can be alleged in a law suit where a person who suffers damages as a result of a third party’s concealment of a material fact, has a claim against that third party.

In the context of the sale of real estate, non-disclosure of a material fact ordinarily does not give rise to a claim against a seller, however fraudulent concealment of a material fact may be actionable.

Real example: recently, a real estate developer sold a house in Howard County to a consumer without informing that buyer that the lot where the house was located had contained an old cemetery, although the gravesites were in a portion of the lot designated ‘no build’ (the headstones were removed and references to the gaves were deleted from the plats, all in an obvious effort to make the land seem less spooky and more valuable).

Is it possible to for a subsequent purchaser to recover even if he was not the first party to be deceived?

Yes. It so happens that in the example above, the person who sued the developer for not disclosing the cemetery was the second purchaser. The developer did not get off because the initial purchaser did not discover the hidden defect and sold the land to a subsequent purchaser. The second purchaser did recover damages even there was an intermediate owner.

What is an undisclosed “material defect”?

An undisclosed “material defect” is a problem with the property that the seller knows about, knows would make the property worth less, and which the seller chooses to conceal from the buyer. Typically undisclosed material defects include defects in the building materials (i.e. condition of the plaster), problems with the foundation of a dwelling, and termite infestation.

Are home inspections and investigations about the condition of the property still necessary, given the possibility of recovering for fraudulent concealment?

Yes. Purchasers should never fail to have property inspected by qualified experts prior to purchasing property. Indeed, purchasers have a duty to exercise “due diligence” to discover whatever defects exist on the property they are purchasing. Damages for fraudulent concealment are only available if the problem was undiscoverable in the buyer’s exercise of due diligence and known or readily discoverable to the property seller.

What About Misrepresentations Concerning the Condition of the Property?

Do understand that “misrepresenting” the condition of property is different than “concealing” a known defect. That being said, both behaviors are fraudulent. Whether one can recover for fraudulent concealment depends upon the totality of the circumstances, including the contract between the buyer and the seller, what was said, how it was said, by whom, to whom, and the totality of the other circumstances.

Learn More

If you would like to learn more about bringing or defending a case related to a defect not disclosed in the sale of real estate, including possible claims for fraudulent concealment or fraudulent misrepresentation, feel free to contact the Law Offices of Amar S. Weisman, by calling 410-321-4994. During the initial consultation, we can discuss the different elements of your case and make a better prediction about costs and potential outcomes.

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