If you have ever sold real estate in Michigan – specifically a home with one to four residential units – you may recall completing a Seller’s Disclosure Statement as part of that sale. But if you were acting in a fiduciary role when making the sale, you didn’t need to, and should not have, provided that statement.
What’s a Disclosure Statement?
Michigan’s Seller Disclosure Act requires sellers to indicate the presence of various items in the home, such as:
- Ranges and ovens
- Garage door openers
- Alarm systems
- Saunas and hot tubs
- Washers and dryers
- Lawn sprinkler systems
- Wells and pumps
- Septic tanks and drain fields
The act requires sellers to state whether the items are in working order, and to also provide, for example, representations regarding any history of water in basements, the existence of known electrical issues, the type of plumbing in the home, and any known history of infestation or environmental problems.
Failure to Disclose Information on a Disclosure Statement
Requiring a seller to complete and deliver a disclosure statement to a buyer makes absolute sense. After all, who is in the best position to identify possible issues with a home than the seller who has lived there?
While the representations are not warranties, by signing the disclosure statement the seller is certifying that the information is true and correct to the seller’s knowledge as of the date the statement is signed. And the buyer’s post-purchase discovery of an issue of which the seller should have known can result in a lawsuit for damages or equitable relief.
When the Seller of a Home is a Fiduciary
Sometimes a home seller is not the home’s owner, but is instead serving as a trustee of a trust, the personal representative of the deceased owner’s probate estate, or the conservator or guardian of a ward who owns the home. Although authorized to sell the home, the fiduciary doesn’t own the home and may have little insight as to the condition of the property.
If you’re acting as a fiduciary when selling a home and a disclosure statement is presented to you, you may feel obliged to complete it the best you can. But if you incorrectly represent an item, you may leave yourself and the estate exposed to a buyer’s claim that you misrepresented an issue involving the home.
Imagine that the buyer makes this claim just as you are winding down the estate and moving on with your life, or worse, the claim is made after you have made distributions to the beneficiaries and no longer have funds available to defend the buyer’s claim. Good luck recovering funds from the beneficiaries to pay the claim and any fees!
Just Say No
If you’re acting in a fiduciary role when selling a home in Michigan, and you are asked to complete a Seller’s Disclosure Statement, you should kindly refuse the request. And the law is on your side.
According to the Seller Disclosure Act, real estate transfers by a nonoccupant fiduciary (again, a trustee, personal representative, guardian, conservator, etc.) in the course of the fiduciary’s administration are not subject to the disclosure statement requirements. The exception does not apply if you are a fiduciary currently occupying the home or you are acting as the trustee of your own trust. In those instances, you must complete the disclosure statement unless another exception applies.
Because of the potential risk associated with mistakenly responding to the disclosure statement incorrectly, completing the statement even when you do not have to is not recommended. If you do so, you are unnecessarily exposing yourself and the estate to liability.
Talk to a Michigan Real Property Attorney
If you are a fiduciary selling a home in Michigan and you have questions regarding your obligations under the Seller Disclosure Act or other laws, consult an experienced estate administration or real property lawyer to avoid unnecessary headaches and risks. The lawyers at Kreis Enderle are happy to help, so please contact us today.