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.
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Week 10 brought meaningful movement on several Louisiana REALTORS® priorities affecting real estate, property rights and insurance. And Week 11 is shaping up to be one of the most important stretches of the session. The biggest developments last week were the final Senate passage of HB 468 by Rep. Troy Hebert with amendments, movement of HB 1027 by Rep. Hebert to the Governor for executive approval, continued Senate progress on HB 1187 and HB 1166 , and final legislative action on SB 180 . REALTOR® Day at the Capitol also came at an important time, giving members the opportunity to reinforce industry priorities with legislators as several key bills neared final passage or awaited committee, concurrence or floor action. Just as importantly, the Louisiana REALTORS® legislative package has now cleared most of its major hurdles, and barring any late-session surprises, the remaining package’s bills should be headed to the Governor’s desk shortly. On the core real estate package, HB 468 , the wholesale regulation bill, remains the most immediate priority. The Senate passed the bill 34-0 on May 12 with amendments, and it now returns to the House for concurrence. That places it in a fast-moving posture, and members should be prepared for quick House action once concurrence is called. HB 1027 , the appraiser liability bill, has now moved into final executive posture after passing the Senate 35-0 without amendments and being sent to the Governor. Together, those two bills represent major wins for consumer protection, market integrity and greater certainty in the real estate transaction process. Insurance remains one of the busiest and most important policy areas as we head into Week 11. HB 1187 , dealing with Louisiana Citizens for emergency assessments, was reported favorably by the Senate Insurance Committee and is now pending Legislative Bureau for review in the Senate. HB 759 , addressing fortified roof endorsement offers, remains one of the more important insurance and mitigation bills still in play and is positioned for Senate floor action. HB 408 , which would prohibit insurers from non-renewing residential policies when homeowners timely mitigate risks, remains pending in House Insurance, as does HB 1210 , which would create a mandatory pre-suit claim review process for residential property insurance. Additional insurance measures, including HB 850 on Standard Fire Policy cancellation notices, HB 1162 on contractor verification in insurance claims, and SB 241 on adjuster and appraiser license-number disclosure, also remain active. These bills continue to matter because insurance affordability, mitigation, claims handling and policy stability remain central to property ownership and transaction viability across Louisiana. On disclosure and regulatory matters, HB 1166 by Rep. Kim Carver , requiring disclosures for vacant residential property and carrying out the adopted LREC reform amendment, was reported favorably by the Senate Commerce Committee and is now pending with the Legislative Bureau for review in the Senate. That keeps the bill in a strong position for Senate floor movement and makes it one of the key bills to watch in Week 11. SB 180 , allowing a surviving spouse of a deceased disabled veteran to transfer an expanded property tax exemption under certain circumstances, has completed legislative action and is now in final processing. Week 10 and the run into Week 11 also reflected an important defensive win for Louisiana REALTORS®. Our team successfully worked to block and tackle HB 617 and HB 750 to ensure real estate and nonprofit activity were not swept into overly broad consumer protection frameworks. On HB 617 , Louisiana REALTORS® opposed the bill as drafted and worked to posture it so that real estate professionals would not be caught up in a fee-disclosure framework that does not fit the realities of real estate transactions. On HB 750 , we worked to ensure the bill would not be interpreted to reach real estate or nonprofit operations in a way that could create unintended compliance burdens for leases, property management arrangements, association activity, or recurring charges authorized under those structures. That effort helped keep broad subscription-style language from bleeding into housing and nonprofit operations where it plainly does not belong. Civil justice and broader property rights measures also remain active entering Week 11. HB 437 , dealing with expert witness fees, and HB 1089 , creating CARE Accounts for certain damages arising from delictual actions, remain pending in Senate Judiciary A and remain high-priority tort reform measures to watch. HB 472, the rent stabilization bill, remains involuntarily deferred and stays on the watch list for any attempted revival through another vehicle or amendment. Additional redevelopment and tax-related measures, such as HB 214 and HB 217, also remain relevant to the broader conversation on blight, reinvestment and neighborhood stabilization. A few additional housing and valuation bills are also worth noting HB 292 on security deposits, HB 297 on early lease termination in stalking and cyberstalking situations, and HB 300 on appraisal thresholds for bank-owned property have all advanced and remain part of the broader housing policy landscape. The practical takeaway is straightforward: Week 11 will likely move fast, and late-session maneuvering can matter as much as headline floor votes. Louisiana REALTORS® should be prepared for House concurrence on HB 468 , further Senate movement on HB 1166 and HB 1187 , continued action on insurance and tort reform, and the possibility of late amendments or procedural pivots on bills affecting real estate transactions, private property rights, housing affordability, nonprofits, property managers and the broader real estate industry. The package is in strong shape, but this is the point in the session when the finish line comes into view and traffic gets thick. Please view the weekly bill tracking report provided by our lobbying team over at Harris, DeVille and Associates.
