Seller's Responses to Property Disclosure Document
Amy Fennell • August 14, 2017
Louisiana law requires residential sellers to complete to the best of their knowledge a "property disclosure document" detailing the condition of the property being sold.[1] Most residential sellers complete the property disclosure document form prepared by the Louisiana Real Estate Commission ("property disclosure document" or PDD). A recent Louisiana case calls into question how sellers should respond to the PDD questions.
1. BACKGROUND OF CASE
In Valobra v. Nelson, the buyer sued the seller alleging the seller misrepresented the condition of the property by checking the "no" box on the PDD instead of the "no knowledge" box as to questions regarding the condition of the property.[2] The buyers allege because of this misrepresentation by the sellers on the PDD, the buyers agreed to buy the property "as is" and waive redhibition rights in the Act of Sale. Redhibition is a warranty required by state law to be given to a buyer unless waived by the buyer. Redhibition means the buyer can sue to return the property to the seller or get a refund of a portion of the purchase price after the sale if the buyer discovers a defect in the property that if the buyer had known about prior to the sale he would not have bought the property.[3] The Valobra buyers alleged that the sellers checked the box marked "no" in response to questions on the PDD regarding whether the property had certain defects. Defects in the property were later discovered. The sellers then claimed they did not know of the defects in the property.[4] The buyers argued that the sellers checking the box marked "no" instead of the box marked "no knowledge" on the PDD and therefore intentionally misled the buyers into believing that the sellers had knowledge that there were no defects in the property. The buyers alleged the sellers were in bad faith and fraudulently induced the sellers to execute a waiver of redhibition contained in the Act of Sale by stating "no" instead of "no knowledge" of the defects.[5]
2. LOUISIANA SUPREME COURT ANALYSIS
In Valobra, the Louisiana Supreme began its analysis by citing Louisiana Revised Statutes § 9:3198(B)(1): "The seller shall complete the property disclosure document in good faith to the best of the seller's belief and knowledge . . . If the seller has no knowledge or information required by the disclosure document, the seller shall so indicate on the disclosure statement and shall be in compliance with this Chapter (emphasis supplied)."[6]
The Supreme Court held that the buyers need not prove the sellers had "actual knowledge" of the defect to bring the suit.[7] The Court declared that the "[p]laintiffs (buyers) have stated a cause of action to challenge the validity of the waiver (of redhibition),"—fraud—and "are entitled to litigate this threshold issue..."[8] The Court seems to imply that when sellers check "no," the sellers are representing the property does not have a certain defect and when sellers check "no knowledge," the sellers are merely not aware of the defect.
The Valobra decision is limited in its application due to the fact that what was before the Court was to determine the buyers had effectively stated a cause of action to challenge the validity of the waiver and were entitled to move forward with the litigation.[9] The Supreme Court returned the case to the trial court level and the litigation is ongoing.[10] The Court has not rendered a final decision on whether or not the Valobra buyers were misled.
3. THE LOUISIANA REAL ESTATE COMMISSION
The Valobra decision highlights a need to protect sellers from inadvertently subjecting themselves to claims for fraudulent misrepresentation and protect buyers from misinterpretation of the information provided by sellers. The Louisiana Real Estate Commission is considering this issue and may provide additional clarity for a seller's disclosures through changes to the PDD.
4. CONCLUSION
The Valobra Court's holding is a word of caution for sellers to closely consider their responses to the PDD. Sellers should consider refraining from checking the box marked "no" for any inquiry regarding defects in the property unless the seller actually has knowledge that the property does not have the property defect. The Court's decision indicates that the improper completion of the document can create a cause of action of fraud against the seller. The practical consequence of Valobra is that sellers should mark "no knowledge" regarding property defects if the sellers lack knowledge as to whether there are such defects in the property.
DISCLAIMER
These materials are to be used for informational purposes and should not be construed as specific legal advice. These materials are not designed to cover every aspect of a legal situation for every factual circumstance that may arise regarding the subject matter included.
This publication is for reference purposes only and association members or other readers are responsible for contacting their own attorneys or other professional advisors for legal or contract advice. The comments provided herein solely represent the opinions of the authors and is not a guarantee of interpretation of the law or contracts by any court or by the Louisiana Real Estate Commission.
[1] La. R.S. 9:3198 et seq.
[2] Valobra, 136 So.3d (La. 2013)
[3] La. Civil Code 2520
[4] Id.
[5] Id.
[6] Id.
[7] Id.
[8] Id.
[9] Id.
[10] In another recent case, Louapre v. Booher, 2016 WL 4555716 (La. App. 4th 2016) the court distinguishes Valobra in deciding whether to grant summary judgment.
This week, the Legislature remained in high gear, and several items relevant to Louisiana’s real estate market moved into focus. The biggest headline for our industry this week was HB 468 by Rep. Troy Hebert , our wholesaling/consumer-protection bill, was slated to be heard on the House floor, however was bumped due to floor congestion and out-of-order bills. It is now expected to be reset for next Tuesday. This bill remains one of the clearest “market integrity” efforts on the board with clearer rules for non-traditional transactions, stronger transparency and better consumer protections. We also continued substantive policy work behind the scenes. We are actively engaging with Rep. Carver on a vacant land disclosure bill he has authored, and we appreciate that he is welcoming our input and guidance as the language is refined. Our goal is straightforward: ensure any vacant land disclosure framework is practical, reduces confusion and avoids unintentionally shifting liability or enforcement burdens onto real estate professionals. In addition, we were pleased to deepen our relationships at the Capitol this week. We had the privilege of hosting a lunch for the Governor’s Office, enjoyed meeting Governor Landry’s team, and look forward to working with them in a constructive, solutions-oriented manner as the session continues. Finally, Rep. Hebert also filed an additional measure that aligns with our legislative agenda and speaks directly to transaction risk management: HB 1027 , which would limit liability for licensed real estate appraisers in situations involving smoke and carbon monoxide detector compliance. The current law already provides that real estate agents are not liable for a seller’s failure to comply with Louisiana’s detector requirements in one- or two-family dwellings. HB 1027 would extend that same liability protection to licensed appraisers by amending R.S. 40:1581(F). This is a clean, common-sense clarification that helps prevent appraisers from being pulled into compliance disputes that properly belong with the seller’s statutory obligations. Next week, committees are scheduled to hear multiple bills relevant to real estate, including measures involving construction and roofing standards (often tied to insurance and mitigation), property rights/expropriation, and property tax and adjudicated property issues that can influence housing supply and neighborhood reinvestment. We will stay closely engaged and will flag any bills or amendments that materially affect transactions, homeownership costs or private property rights. Please view the weekly bill tracking report provided by our lobbying team over at Harris, DeVille and Associates.
Louisiana REALTORS® is compiling a cookbook of Louisiana flavor with a REALTOR® heart in support of the REALTORS® Relief Foundation . And we have two ways for you to get involved: Join us in contributing your favorite recipe using this online form. If you want to include a picture with your recipe, send to info@larealtors.org and reference recipe title in email subject. Or share your creativity by designing the cover artwork for the cookbook. A small committee will review all entries and choose one to print on the cover. Stay tuned for more details on when you can grab your own copy of the cookbook! Cover artwork and recipes are due by April 17th.
Week three of the Regular Session kept real estate issues in the conversation, even as lawmakers continued to focus heavily on workforce, tax and insurance policy. On the property tax front, measures to reshape assessments and exemptions, including proposals for a new blight rehabilitation exemption and additional relief for seniors, remain parked in the House Ways and Means Committee as stakeholders work through fiscal and local government concerns. These bills matter because they will influence long-term carrying costs, redevelopment incentives and how tax burdens are shared across residential and commercial property. Homestead related legislation, including parish level authority to increase the exemption amount, is also in the queue, signaling that the broader structure of Louisiana’s homestead system is officially on the table, not just the dollar figure. For homeowners and buyers, this debate goes directly to affordability. For local governments, it raises revenue stability and service delivery questions. There also has been movement on several identical pieces of legislation that would instruct parish assessors to develop a process for homeowners to permanently register for the homestead exemption for the duration that they own and live on the property. We are actively tracking legislation that will directly shape how investor activity and non-traditional transactions are recognized and regulated in Louisiana’s real estate market. This includes HB 468 by Troy Hebert , a key component of the Louisiana REALTORS® legislative package that targets the wholesale of residential real estate, which was heard in the House Commerce Committee on Monday. The bill is currently positioned for a floor vote early next week. As drafted, HB 468 represents a major step in the right direction for consumer protection in Louisiana, advancing needed guardrails through potential disclosure, registration, and practice standards that could redefine how assignment contracts and “off-market” transactions intersect with licensed brokerage activity. In parallel, HB 292 by Delisha Boyd passed the House on final reading, 86-3, and is on its way to the Senate. Together, these measures represent a coordinated policy effort to bring greater structure and transparency to emerging transaction models, while preserving the integrity of the traditional brokerage framework. Finally, the broader policy backdrop remains important: the Governor continues to push income tax changes and cost of living relief, while business and industry groups are prioritizing insurance, workforce and energy — each a key driver of long run housing demand and investment. As these debates evolve, we’ll keep you updated on what moves, what stalls and what it all means for your clients, your pipeline and private property rights across Louisiana. Please view the weekly bill tracking report provided by our lobbying team over at Harris, DeVille and Associates.
