Monday, February 18, 2013

No One Told You When To Run - You Missed The Starting Gun!

One of the more common questions that I get from people who have purchased a defective home is how long they have to sue their sellers.  In legal terms, when does the statute of limitation on real estate misrepresentation cases run?

Fortunately, reality turns out to be far better than perception on this issue.  Many new homeowners think that it's too late if more than a year has passed since the sale.  The truth is that most claims have a six-year statute of limitation, which may be extended further by the discovery rule and equitable estoppel arguments.

VIOLATION OF WIS. STAT. s. 100.18: Sellers violate Wis. Stat. s. 100.18 by making representations about the condition of their home that are untrue, deceptive, or misleading.  Per Wis. Stat. s. 100.18(11)(b)3., "no action may be commenced under this section more than 3 years after the occurrence of the unlawful act or practice which is the subject of the action."  Generally, buyers must commence a s. 100.18 action within 3 years after viewing a Real Estate Condition Report.  

BREACH OF CONTRACT: Sellers breach the standard WB-11 Offer To Purchase contract by failing to disclose defects in their Real Estate Condition Report. Per Wis. Stat. s. 893.43, a breach of contract action "shall be commenced within 6 years after the cause of action accrues or be barred." A contract cause of action accrues at the time of breach.  Therefore, a buyer must commence a breach of contract action within 6 years after the sellers accepted the offer to purchase.

INTENTIONAL MISREPRESENTATION: Per Wis. Stat. s. 893.93(1)(b), an "action for relief on the ground of fraud" "shall be commenced within 6 years after the cause of action accrues or be barred."

VIOLATION OF WIS. STAT. ss. 895.446 and 943.20: Wis. Stat. s. 895.446 creates a cause of action for victims of theft by intentional fraud.  Wis. Stat. s. 895.446 does not contain any statute of limitation.  Its cause of action may be governed by s. 893.93(1)(b) or it may be governed by s. 893.93(1)(a), which provides that "an action upon a liability created by statute when a different limitation is not prescribed by law" "shall be commenced within 6 years after the cause of action accrues or be barred."  Regardless, the statute of limitation is clearly 6 years after accrual.

WHEN DOES A FRAUD CLAIM "ACCRUE"?
Wis. Stat. s. 893.93(1)(b) declares that a fraud cause of action "is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud."  


Let's say that you purchase a home with a brand new finished basement and live in it for 8 years.  You put it up for sale and the only interested buyer insists that you remove the drywall for his home inspector.  Upon removing the drywall, both of you discover that the foundation walls are cracked and caving in.  Not surprisingly, you lose your buyer but gain several $30,000+ foundation repair estimates.  In my opinion, you have a cause of action against your sellers for intentional fraud thanks to the "discovery rule."  

I would also argue that the sellers should be equitably estopped from asserting the statute of limitations as a defense based upon their intentional concealment of defective foundation walls.  Equitable estoppel is appropriate when a defendant’s conduct is “so unfair and misleading as to outbalance the public's interest in setting a limitation on bringing actions.”  State ex. rel. Susedik v. Knutson, 52 Wis. 2d 593, 598, 191 N.W.2d 23, 26 (1971). 

The bottom line is that homebuyers are not necessarily out of luck when defects are discovered years after purchase.  Indeed, I won a Waukesha County jury trial in 2009 for clients who purchased their home way back in 2001.  See Keller v. Gaszak.

That being said, you should contact professionals right away when you discover defects in a newly-purchased home.  As I recommended in an earlier post, you should start with your real estate agents, consultants, and repair professionals.  You also need to seek legal counsel as soon as possible.  The Wis. Stat. s. 100.18 claim is a powerful claim.  You don't have to prove intent to defraud.  You don't have to prove that the representation was actually false; only that it was "deceptive" or "misleading."  You don't even have to prove that it was reasonable for you to rely upon the representation.  You're entitled to recover reasonable attorneys' fees from the sellers if you win.  However, the 3-year statute of repose is harsh, and the discovery rule does not apply.  Furthermore, juries believe that timing matters regardless of what the law is.