Fraud & Non-Disclosure

Buying a new home is one of life's biggest investments. You spend months searching, find the perfect property, sign the sales contract, and close on the purchase. The seller completes their Colorado Seller's Property Disclosure, and everything appears to be in order.

But what happens when you discover significant problems with the property that weren't disclosed to you? If you find yourself in this situation, you need to understand your rights under Colorado law.

Understanding Colorado Real Estate Disclosure Laws

Colorado law requires sellers and real estate brokers to disclose certain property conditions to buyers. These disclosure obligations exist both through contract requirements and common law duties.

Contractual Disclosure Requirements

When a licensed real estate broker handles a home sale, the parties typically execute the Colorado Real Estate Commission's Contract to Buy and Sell Real Estate (Residential). Under Section 10.1 of this agreement, sellers must complete and deliver the most current Colorado Real Estate Commission's Seller's Property Disclosures to the buyer.

This disclosure form covers numerous categories of property conditions that sellers must address. Examples of adverse material facts that must be disclosed include:

• Building or zoning violations

• Water damage to flooring

• Structural damage from insect infestations

• Issues caused by expansive soils

• Any liens filed against the property

If sellers have actual knowledge of adverse property conditions, they must disclose these on the form. Failure to do so constitutes a breach of contract and can lead to understanding consumer fraud and the role of a Colorado consumer fraud lawyer.

Common Law Disclosure Duties

Beyond contractual obligations, Colorado real estate disclosure law establishes that "home sellers owe home buyers an independent duty to disclose latent defects of which they are aware." In re Gattis v. McNutt, 2013 COA 145, ¶2.

Home sellers must disclose all "latent but known defects." A latent defect is a hidden or concealed problem that could not have been discovered through reasonable and customary observation or inspection by the buyer.

Real Estate Broker Obligations

Real estate brokers also have disclosure duties. Like buyers, brokers have an affirmative duty to disclose adverse property conditions they actually know about. Baumgarten v. Coppage, 15 P.3d 304, 307 (Colo. App. 2000).

While brokers aren't required to complete the Seller's Property Disclosures themselves, they should review this document to ensure all adverse property conditions have been disclosed. Their failure to do so can subject them to liability to the buyer.

Important Exceptions: Property Stigmatization

There's an important caveat to disclosure obligations. Sellers and brokers are not required to disclose facts or suspicions that "could psychologically impact or stigmatize" the property. C.R.S. § 38-35.5-101.

Colorado provides minimal guidance on what constitutes psychological impact or stigmatization. However, the statute specifically excludes two circumstances from disclosure obligations:

1. A prior occupant was diagnosed with AIDS, HIV, or other disease that is highly unlikely to be transmitted

2. The property was the site of a homicide, suicide, or other felony

Potential Damages for Real Estate Fraud

When sellers or brokers breach their disclosure obligations, property buyers can seek several types of damages:

Primary Damages

The main category of damages covers the economic cost to repair or replace the undisclosed or misrepresented condition. This might involve understanding the costs associated with fixing construction defects if the undisclosed issues involve structural problems.

Additional Damages

Buyers may also be entitled to:

• Non-economic damages

• Prejudgment interest

• Attorney fees and costs (if the parties used the Colorado Real Estate Commission's standard contract and the buyer prevails)

Taking Action Against Real Estate Fraud

If you've been the victim of real estate fraud or failure to disclose home defects, it's important to understand that understanding legal liability for failure to disclose property defects can be complex. The key is documenting the undisclosed conditions and proving the seller or broker had actual knowledge of them.

Consider also whether the issues you've discovered might constitute construction fraud, especially if they involve deliberate concealment of construction-related problems.

Getting Legal Help

If you believe you've been the victim of real estate fraud or non-disclosure, consulting with an experienced attorney can help you understand your rights and options. A qualified lawyer can review your situation, investigate your claims, and help you build a case to recover adequate compensation.

The goal is to ensure you receive the benefit of the bargain you entered into when purchasing your home. With proper legal guidance, you may be able to recover damages that address the undisclosed problems and restore your investment.