In Alabama, unlike many other states in the country, they have a rule called caveat emptor for the sale of used residential property applies. Caveat emptor means “let the buyer beware” in Latin, which implies that the seller does not have any actual duty to inform the buyer of issues with the property’s physical condition during the sale. Like those across the United States, home sellers in Alabama must follow federal regulations on lead paint disclosures.
Alabama Caveat Emptor Rule: Exceptions
The caveat emptor rule in Alabama has three exceptions, where sellers are legally duty-bound to disclose property condition issues to the buyer:
- There exists a fiduciary relationship between the buyer and seller
- The seller is aware that the home may pose a medical or safety risk to the buyer, and
- The buyer directly asks the seller questions on specific defects
In the above cases, the seller is legally responsible for disclosing those defects they are personally aware of.
Fiduciary duty refers to the legal responsibility to act in the best interest of another party, such as if the seller was the buyer’s medical doctor or lawyer. It will be considered a breach of fiduciary duty if the seller is the buyer’s physician and knows that the buyer has an allergy to cedar yet fails to disclose that the house contains cedar cabinets.
Alabama’s health and safety guidelines require residential property sellers to inform potential home buyers of defects that may pose a direct danger to the buyer’s safety or health. For instance, it would be a health and safety defect if a seller is aware that the property has lead paint or asbestos. These types of situations necessitate the seller notifying any potential buyers of lead paint or asbestos in the property.
Finally, if a buyer asks a direct question about a defect, the seller must respond honestly and reveal known defects, under Alabama law. If the buyer, say, asks about pest infestations on the property and the home seller does not mention the termite eradication treatment undertaken last year, it would breach the law. The seller should not conceal the truth or lie to the potential buyer, as doing so will only make matters worse later.
A seller who does not disclose known material defects to a potential buyer may be held responsible for damages. If a buyer finds a defect that the seller did not disclose, they can sue the seller for negligence, suppression of material facts, or fraud.
However, Alabama law may not consider the mere inability to reveal a known defect enough to hold a seller accountable for damages. The buyer would need to prove that the seller was aware that the defect posed a direct threat to their safety or health, which can be quite challenging to establish, depending on the specific situation.
Reduction in Seller’s Risk through Complete Disclosure
Alabama law does not necessitate that sellers provide a comprehensive list of flaws to potential buyers, but smart sellers will reveal material defects as a risk-management technique. Completing a property disclosure form and giving it to the buyer at the time of the sale is one way to reduce risk.
The disclosure form aims to help both buyers and sellers understand facets of properties that may warrant attention, such as safety, environmental, health, mechanical, structural, or other potential issues. In general, the disclosure form is quite detailed and requires information on aspects such as the roof, boundaries, plumbing, and air conditioning and heating systems, among others.
Most real estate agents in Alabama attach a filled-out disclosure form as an exhibit to the sale and purchase agreement. The Alabama Association of Realtors has created this disclosure form. The real estate agent will usually give the seller the disclosure form to fill out and sign when the seller lists the property with the agent.
The real estate agent of the seller will then present a copy of the disclosure to any prospective buyer who seeks more information regarding the property before the purchase. If you are selling your residential property on your own, you may be able to locate a comprehensive disclosure form online or at your neighborhood library.
A seller in Alabama is not legally required to complete the disclosure form, but providing a potential buyer with a completed form, or a similar disclosure document, is an effective way to ensure that you are making all mandatory legal disclosures.
Consult an Experienced Alabama Real Estate Lawyer
At the law offices of Davis, Bingham, Hudson, & Buckner, P.C., our skilled lawyers have numerous years of experience in real estate law. We can offer you guidance on all facets of selling or purchasing residential real estate. There are diverse real estate transactions, and our firm has the resources and experience to ensure a successful closing and satisfied clients. To schedule a consultation with a seasoned real estate attorney, call today at (334) 821-1908.