What Does It Mean That Alabama is Caveat Emptor State?
In Alabama, the seller of used residential property has no actual obligation to disclose to the buyer any issues with the physical condition of the property. This rule is known as caveat emptor, which in Latin means “let the buyer beware.” Normally it is up to the buyer of the property to discover any issues or defects. Essentially, caveat emptor serves as a warning to buyers that they have no recourse with the seller should the property fail to meet their expectations.
Although it is the responsibility of the buyer to inspect the property for any potential issues, the seller is not free to make fraudulent transactions. There are some instances in which the seller of a property needs to alert the buyer of any potential issues.
Exceptions to Alabama’s Caveat Emptor Rule
In Alabama, a seller is responsible for disclosing any potential issues to the buyer in the following cases:
- A fiduciary relationship exists between the buyer and seller, meaning that the seller is legally responsible to act in the best interest of the seller. For example, if the seller is the buyer’s financial advisor and knows that the property will cost more to repair than its potential resale value, such information should be disclosed. Failure to disclose such information could be considered a breach of fiduciary duty.
- The seller is aware of any issue(s) that may pose a risk to the health or safety of the potential buyer. Such an instance might be if the seller knows that the property contains lead paint or asbestos.
- The buyer directly questions the seller about any possible issues with the property. The seller has a legal obligation to answer honestly any questions that a potential buyer may have about the property.
When Is a Seller Liable For Damages?
Following a transaction, if the buyer discovers a defect that the seller failed to disclose, the buyer can potentially sue for misrepresentation, negligence, suppression of material facts, or fraud. However, under Alabama law, the seller is not liable for damages simply because he or she failed to disclose information regarding a defect. The buyer must prove that the seller knew of the defect and that the defect would pose a potential health or safety risk to the buyer.
Complete Disclosure Reduces Legal Risk for Sellers
As a seller of property in Alabama, it may be helpful to provide the buyer with a disclosure form during the sale. This will ensure that both the buyer and the seller are informed of any potential areas of improvement that the property may require. Typically, Alabama real estate agents will ask the seller to complete a disclosure form when the seller decides to list the property. The real estate agent will provide this form to any potential buyers before the sale is complete.
If you are selling property without the assistance of a realtor, consider acquiring a disclosure form online or from a local library. The purpose of the disclosure form is to ensure that the seller provides all the necessary disclosures before selling the property. Additionally, it is important that the seller formally acknowledges receipt of the disclosure form, either by signing and dating the form or some other written acknowledgement, such as an email or letter.
Err On the Side of Caution and Retain the Help of a Reputable Real Estate Lawyer
Should you encounter difficulty with real estate transaction regarding the disclosure of any defects, you may wish to contact an experienced attorney. The Alabama real estate attorneys at Cloud Willis & Ellis can assist you in smoothly resolving any potential conflicts.