Is the Seller at Fault for Not Disclosing Special Assessment Costs?

Question from Sam, Is the Seller at Fault for Not Disclosing Special Assessment Costs?

Answer from AI:

When dealing with the sale of commercial property, especially in a situation involving special assessments, disclosure obligations can be complex. In South Carolina, as in many other states, sellers have a duty to disclose certain information to buyers. This duty is often governed by state laws and regulations, as well as the terms of the sales contract.

Disclosure Obligations in Real Estate Transactions

In general, sellers are required to disclose material facts that could affect the value or desirability of the property. This includes known issues such as structural problems, environmental hazards, and, importantly, special assessments by a Homeowners Association (HOA).

South Carolina Disclosure Requirements

South Carolina law requires sellers to provide a Residential Property Condition Disclosure Statement, which includes information about any known assessments. While this form is typically used for residential properties, similar principles apply to commercial transactions. The seller must disclose any material facts that could influence the buyer’s decision.

Special Assessments and the Master Deed

In this case, the special assessment for repairing two buildings was passed, and it violated the master deed by holding owners responsible for repairs to another building. This is a significant issue that should have been disclosed to the buyer.

Buyer’s Due Diligence

The buyer asked for a 30-day extension of due diligence to investigate the assessment but found no information due to the HOA’s unresponsiveness. Despite this, the buyer proceeded with the purchase and later joined a lawsuit with other unit owners. The mediation resulted in the HOA agreeing not to hold the buyer responsible for the other building’s repairs.

Legal Proceedings and Mediation

The buyer’s lawsuit against the HOA was resolved through mediation, where the HOA agreed to keep the money paid and not make the buyer responsible for the other building’s repairs. However, the buyer then sued the seller for improper disclosure, claiming that the seller knew the estimates but did not disclose them.

Seller’s Defense

The seller claims damages, legal fees, and loss of income, arguing that they did not have to disclose the specific amounts of the assessment since the HOA was unresponsive and the exact amounts were not finalized.

Potential Legal Outcomes

Whether the seller is at fault depends on several factors:

1. Materiality of the Information: If the special assessment was a material fact that could affect the property’s value, the seller had a duty to disclose it.
2. Knowledge and Intent: The seller’s knowledge of the estimates and their intent in not disclosing them will be scrutinized. If the seller knowingly withheld material information, they could be found at fault.
3. Contractual Obligations: The terms of the sales contract will be crucial. If the contract required disclosure of all known assessments, the seller’s failure to disclose could be a breach of contract.

Consulting a Legal Professional

Given the complexity of this situation, it is essential to consult with a legal professional who can provide personalized advice based on the specific facts and circumstances. A lawyer can help determine whether the seller’s actions constituted a failure to disclose material information and what remedies might be available to the buyer.

For more information on South Carolina’s real estate disclosure requirements, you can refer to the [South Carolina Code of Laws](https://www.scstatehouse.gov/code/t27c050.php).

In summary, while the seller may have had a duty to disclose the special assessment, the specific legal outcome will depend on the details of the case, including the seller’s knowledge and the terms of the sales contract. Consulting with a legal professional is crucial to navigate this complex issue.