Sunday, October 6, 2013

Don't Take The Easy Way Out- My Take On Ivancevic v. Reagan

On September 17th, the Wisconsin Court of Appeals filed its decision in Ivancevic v. Reagan and recommended it for publication.  In Ivancevic, the buyers of a property sued their sellers, seeking to rescind their purchase contract on the grounds of "mutual mistake."  They claimed that neither party was aware of defects in the property's roof and attic ventilation system and that the sellers should be forced to repair or buy back the property as a result.  The Court of Appeals affirmed the trial court's order dismissing the case, citing firmly established precedent for the proposition that reformation of a contract on the grounds of mutual mistake is available only when both parties to the contract are not aware of even the possibility of material defects.

In my opinion, the proposition that the parties to a residential real estate transaction are not aware of the possibility that the property contains material defects is absolutely ridiculous.  The likelihood of property defects is why buyers should insist on receiving a Real Estate Condition Report from the seller, as I advised in an earlier post.  Also, the standard WB-11 Residential Offer To Purchase contains contingencies giving buyers the opportunity to have a professional inspect the property for defects.  If the home inspector discovers defects, the contract may give the sellers the right to cure these defects or give the buyers the right to void the offer because of these defects.  True, the home inspector is unlikely to discover all (or even most) defects affecting the property.  Regardless, buyers insist on Real Estate Condition Reports; home inspections; and even specialized foundation, roof, mold, radon, septic, well, and well water inspections because they know (or have been advised by a real estate agent, their parents, or anyone with an ounce of common sense) that it is possible that the property they're considering purchasing will have defects.

What really happened in Ivancevic is that the buyers were either unwilling or unable to plead and prove that the sellers misrepresented the condition of their property - that they knew of defects affecting their property that they did not disclose.  In most cases, buyers' only viable claims against sellers are misrepresentation claims.  Even buyers' "breach of contract" claims are really misrepresentation claims because the standard sales contract only requires sellers to disclose known defects, as discussed in Ivancevic.  It's certainly not easy to prove that sellers lied about their property's condition in their Real Estate Condition Report.  It's certainly not "nice" to call sellers "liars," which is what you're doing when you sue them for misrepresentation and fraud.  Then again, it's certainly not "nice" to sell a wide-eyed twenty-something couple their first home without telling them that they will have to excavate the foundation, replace the roof, drill a new well, or install a mound system.

If you convince me that your sellers knew about the defects affecting your property, I will tenaciously pursue misrepresentation claims on your behalf.  If I am not convinced that your sellers lied to you, I will not take the easy way out by pursuing a half-baked "mutual mistake" claim, for such a claim would waste your time, my time, and the court's time.  Instead, I will be upfront with you about the shortcomings of your case, advise you how you could address those shortcomings, and warn you about the time limits on misrepresentation claims.  If pursuing claims on behalf of homeowners against sellers was easy, every attorney would do it!  

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