Suing for Latent Defects in a Home Purchase in Georgia

Purchasing a home may be one of the most rewarding, yet terrifying transactions that a consumer can make in their lifetime.  It is universally understood for many of us that it is the single largest purchase we will ever make.  A commitment this large can make even the most self-assured buyer uneasy. 

Obvious defects in a home are not as worrisome in this case, as cracked walls and non-working electricity are straightforward to diagnose.  Issues that are less obvious are the ones that keep the would be purchaser up late at night.  These issues are referred to as “latent defects”.  Latent defects are those problems with property that are not visible to the naked eye.  These issues can be wide ranging, like asbestos in older homes, corroded piping that leads to a plumbing leak, or carbon monoxide leaking into the home.

In Georgia, like many states, the seller is required to provide disclosures of all known defects, obvious or not.  The purpose is to inform the cautious buyer of any issues that they may incur, and to avoid purchasing a home with such defects that they will have to fix.  Of course, while this is the law, this is not always followed to the extent a purchaser would like.

What happens when you have bought a home, only to find that latent defects exist and the seller failed to inform you?  While it is an uphill battle, you certainly do have options.  While you cannot seek remedy from everyone involved, there are a select few parties you can seek recourse from:

The Seller – As mentioned above, the seller in Georgia is required to provide disclosures on the home.  This disclosure requires the seller to provide a list of defects on the home that they are aware of, but may not be obvious.  While a seller may later deny that they knew about this, patchwork on drywall found after purchase where a leak has formed is an obvious sign that the seller knew there was an issue.

The Sellers agent – similar to the seller, the agent must disclose when asked of any defects on the home, and while their duties are limited, depending on the circumstances they may be on the hook as well.

The home inspector – While Georgia does not require inspections on the purchase of a home, a prudent purchaser will always have one conducted.  The inspector is a trained individual, who is well versed in home construction and accordingly has a higher aptitude for uncovering these issues.  Depending on the issue, a home inspector may be liable for missing it in their inspection of the home.

So now, you have a latent defect, and there is a responsibility for the parties that have not been met, but do you have a case?  There are certain conditions that need to be met before you can proceed. 

Was the defect there before you bought the home?  General wear and tear on the home is not actionable if the loss merely occurs under your ownership, however if the condition was pre-existing then you should be ok to proceed.  Is it a non-obvious defect that was not disclosed, but a prior party was aware of?  In the example above, plumbing may not always be an obvious issue, but if you later find steps have been taken to repair and conceal, and you relied on the non-disclosure of those parties, this condition will have been met.  Finally, the harmed purchaser must prove damages.  Is there an actual cost of repair, or a decrease in the home’s value as a result of the defect?  This will be what your claim in a lawsuit amounts to.

There are a number of legal theories that you can bring against the responsible parties depending on the situation.  It is recommended to review your case with a qualified attorney beforehand to ensure you are bringing an action on the correct theory.  Some of these claims include failure to disclose, negligence, fraud, breach of contract, breach of warranty, and negligent misrepresentation.

If you have recently purchased a home and discover a latent defect, but are unsure of your options, give us a call!  Thrift & McLemore’s attorneys pride themselves on their expertise in the real estate law arena and will fight to get you the recourse that you deserve.  Contact Thrift & McLemore by email at [email protected] or by phone at 678-784-4150.

Home Owners: Obtaining Recourse in Georgia from a Failed Home Inspection

Whether you are purchasing your first home or your fiftieth, one of the most important steps in the purchase process is hiring a home inspector.  This inspector will be the one to tell you whether the dream house you recently went under contract on is structurally sound, or contains issues that no longer qualify it as a dream home at all.

Most of us rely on these inspectors to catch every minor detail; after all, that is why you hired them in the first place!  However, what do we do when we have done our research, hired the best inspector we can find, yet defects in the home are still missed?  After all, there is nothing worse than an inspection stating the home you just purchased is in great shape, only to move in and find out that your foundation needs emergency repair, at a great cost.

In the state of Georgia, before immediately taking your grievance to the home inspector, you may have a better claim against the seller.  Although Georgia follows the mantra of “Buyer Beware”, there is a general duty in the state to disclose to would be buyers known defects within the house, especially if they are not easily discoverable.  Sellers could face liability to the buyer for failing to disclose these material defects, so long as it is provable that the defects were known.

Assuming that the seller was not aware of the defect, or there is no proof of fraudulent concealment on their part, then you can look to the home inspector for relief.  There are two general theories to obtain relief from a home inspector from a botched inspection.  Outlined below, these theories are Negligence and Breach of Contract.

Negligence, in any area of the law is generally the failure to act as a reasonable person as someone similarly situated would do.  In this case, if a different home inspector catches the issue at hand (which can be proven by getting a second opinion), then the original home inspector can be found negligent.  The state of Georgia requires all home inspectors to go through in depth training in order to be licensed, so lack of training is no defense.  One thing to consider is that the inspector is only liable to defects within the scope of the inspection.  If the house does not have running water on the day of inspection, the inspector cannot be liable for defects regarding the plumbing in the home.

Breach of Contract becomes a viable claim when the contract that you entered into with a home inspector contains language that you believe was clearly violated.  This could arise when you specifically negotiated to include tests for lead based paint, the inspection came back clean, and you later find evidence pointing to lead based paint in your home.  If you have a contract in writing with the inspector to perform any review, and you can prove that the review was never in fact completed, this would be the proper avenue for legal recourse.

Assuming that you have a valid claim based on the two legal theories above, there are still items to consider.  The home inspector may have inserted a waiver into the contract called an exculpatory clause.  This clause is common among home inspectors, and generally serves to limit liability in the event that defects in the home are uncovered after inspection.  Instead of being on the hook to replace a whole roof, they may simply attempt to refund the home inspection fee.  They may also have an arbitration or mediation provision, which would make it more difficult to file a lawsuit as a first step.

In summary, a failed home inspection in Georgia does not always leave the buyer out in the cold.  There are several avenues to recover losses in the instance that your home inspection did not uncover material defects in your home.  If you are not sure whether you have an actionable case, you should consult with an attorney before taking any action.

If you have questions regarding a home inspection gone wrong, give us a call!  Thrift & McLemore’s attorneys have represented Georgia home buyers seek legal recourse for defects in their homes not caught by the home inspection.  Contact Thrift & McLemore by email at [email protected] or by phone at 678-784-4150 to discuss how we can help you today!

Freddie Mac will now allow conventional financing for manufactured housing (Credit: Ben Lane HW)

GSE rolls out new manufactured housing financing

Freddie Mac will soon see no difference between certain manufactured homes and traditional single-family housing from a financing standpoint.  The government-sponsored enterprise announced Friday that it is rolling out a new financing program for manufactured housing that will bring conventional financing to factory-built housing.

The program, which is called CHOICEHome, is a two-year pilot that will allow for conventional financing for certain manufactured homes. The homes that will be eligible for the program have features like permanent foundations and pitched roofs.

Many of these homes also come with energy-saving features like Energy Star Qualified Low-E windows, programmable thermostats and minimum insulation values.

According to Freddie Mac, it will treat loans secured by CHOICEHome like loans that are secured by single-family site-built homes.

“If a factory-built home meets certain specifications, it will be granted a CHOICEHome certification and will be eligible for CHOICEHome financing,” Freddie Mac said, adding that its loan products HomeOne and Home Possible will be available for manufactured housing.

Additionally, Freddie Mac said that appraisers will be able to use site-built housing as a comparable for valuation.

The program is part of Freddie Mac’s Duty to Serve plan, which focuses on supporting underserved markets by financing more rural and manufactured housing and preserving more affordable housing for homebuyers and renters nationwide.

“Today’s manufactured homes can deliver outstanding quality at prices that are up to 50% less per square foot than conventional site-built homes,” Freddie Mac noted. “These savings can enable more Americans to own their own home, even in the face of an ever-widening housing affordability gap.”

According to Freddie Mac, to meet the CHOICEHome eligibility requirements, manufacturers and lenders must follow Department of Housing and Urban Development-code guidelines for the construction and siting of the home in order, and lenders must follow local and state guidelines for manufactured housing titled as real property.

“Finding a home is more difficult than ever because of the ongoing housing supply shortage in many parts of the country, especially when looking for a home at a lower price point,” said Mike Dawson, vice president of Single-Family Affordable Lending Strategy and Policy at Freddie Mac.

“Currently there are more than 22 million families living in factory-built housing, and with that number expected to grow, there’s an opportunity for factory-built homes to address the housing supply shortage and quality housing overall,” Dawson added. “This new generation of manufactured housing might just be the best option for first-time homebuyers, Millennials, and empty-nesters looking to downsize.”

(Credit: Ben Lane HW)

If you have questions regarding manufactured housing finance, let us help!  Thrift & McLemore’s attorneys have assisted numerous companies and individuals in this legal field.   Contact Thrift & McLemore by email at [email protected] or by phone at 678-784-4150 to discuss how we can help you.

Dealing With The Commercial Foreclosure Process (Borrowers and Tenants)

If a commercial borrower (or commercial tenant) falls behind on commercial building payments (or lease payments), the lender or lessor can declare a default and foreclose on the property.  The execution of a mortgage or deed of trust (or lease agreement) creates a security interest in the property that gives the lender the right to start foreclosure proceedings to force a sale of the property (or eviction) upon the borrower’s failure to pay the loan/lease according to terms.  The good news is that lenders don’t like foreclosures because they’re costly and difficult. The bad news is that lenders won’t hesitate to foreclose on past due loans (or leases) if they aren’t given better options.

If you are a commercial property owner facing foreclosure, or a commercial tenant with a landlord in foreclosure, it is important to keep in mind that there are many legal intricacies involved with foreclosures.  It may be beneficial to employ the services of Thrift & McLemore to help you navigate the process and ensure that you fully understand your rights under the law.

Commercial foreclosures are, in most cases, very similar to residential foreclosures.  The foreclosure may be nonjudicial or judicial depending on the state where the property is located and what the loan documents dictate.  With both nonjudicial and judicial commercial foreclosures, the process starts when the borrower defaults on the mortgage.  A default occurs when the borrower falls behind in payments or fails to do something that the loan documents require.  After the default, the lender may accelerate, or call due, the outstanding balance on the loan.  Typically, the lender must first send a breach letter to the borrower that outlines the reason for default and gives a time frame during which the borrower may cure the default and avoid acceleration.  Usually, the amount of time given to cure a default is thirty days, but this can vary depending on the terms of the mortgage.  Once the time period expires, if the borrower has not cured the default, then the lender may commence foreclosure proceedings.

Tenants’ Rights Following a Commercial Foreclosure

The rights of any tenants in a foreclosed commercial property will depend on the terms of the lease and the date on which the lease was signed.  The tenant’s interest could potentially be terminated by a foreclosure due to the legal concept referred to as “first in time, first in right,” which allows the purchaser of a foreclosed property to void a lease if the mortgage was executed before the execution of the lease.

Many commercial leases contain a subordination, non-disturbance, and attornment agreement, or SNDA.  Under the terms of an SNDA, the tenant agrees to subordinate its interest in the lease to any lender making a loan secured by the commercial property; the tenant agrees to attorn to, or recognize, any new owner of the commercial property as its landlord; and any new owner of the commercial property agrees not to disturb the tenant’s possession of the property as long as the tenant pays rent and complies with the terms of the lease.  For tenants, an SNDA provides some assurance that their rights to their premises will be preserved even if the property is foreclosed.

-Options in Dealing with Foreclosures

The chances are that a commercial building loan is only a part of bigger financial problems.  Rather than delaying, a borrower should develop a game plan to deal with the situation immediately.  Options include:
  • Reorganizing, consolidating or even eliminating debts through proceedings that may include bankruptcy
  • Trying to work out a compromise with the lender
  • Selling the building

-Negotiating with the Lender

A lender may be willing to compromise.  Possible options include the following:
  • Different payment terms (lower payments over a longer period of time)
  • Forgiving some late payments now in exchange for a longer period of payment
  • Lower payments in exchange for a higher interest rate over a longer payment period
  • Refinancing at a lower interest rate (to make payments lower)

-Deeds In Lieu of Foreclosure

If a lender is unwilling to compromise, consider offering to convey the property back to the lender voluntarily by a “deed in lieu of foreclosure” (sometimes called “deed in lieu of forfeiture”).  A lender may be hesitant to accept a “deed in lieu” if state law provides a borrower with a right to redeem property for a certain period of time (e.g., up to a year later).

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