One of the most frequently asked questions either during the initial stages of a construction defect lawsuit, or certainly somewhere during the lawsuit, is “What if I want to sell my house?” This rather simple question unfortunately has rather complicated response that boils down to “That depends.”
Putting aside the issue of whether there are any lenders who will finance the purchase of the home, the seller has essentially two decisions to make: First, how much to disclose of the lawsuit and the allegations of defects? Second, what to do with the lawsuit itself?
As to the first question, the seller must make a full disclosure of what is known (or be asking for trouble later). Generally, all states recognize a claim for fraud if a seller fails to disclose known construction defects that are not reasonably known to the buyer. For those owners living in a townhome or condominium community, the Homeowners Association records will have documentation of the litigation, which should be shared with the potential buyers.
As to the second question, for those owners living in a townhome or condominium community, most often the Homeowners Association is the named plaintiff so an individual unit sale should have little or no effect on the lawsuit itself. If you are a single family homeowner, however, there are several options. You can assign your rights in the lawsuit to the new buyer. Or, you could choose to dismiss your lawsuit, leaving it to the new owner to pursue should he or she choose to do so. Or, you could retain your rights in the lawsuit, which may open a Pandora’s box new issues from how to calculate your damages to who is the real-party-in-interest.
In short, if you are considering litigation or currently in litigation involving the construction of your home, you should be aware that attempting to sell your home during the lawsuit is a complicated proposition, requiring careful consideration of all your options. A recent post in this blog contained an article explaining more on this topic. Click here to read the article.
Photo courtesy of Flickr, by Jeremy Hall