QUESTION: We have just placed our house, which is nearly 30 years old, on the market for sale. We are concerned whether we will be responsible for any defects in the property or whether we will be liable for any damages which the purchaser might discover after settlement. Are we required to give the purchaser any guarantee or warranty? Under what circumstances might we be liable for any damages in the property?
ANSWER: In Maryland, it is a generally accepted principle that there are no implied warranties in the resale of a previously owned residence. In other words, if the contract does not state that the seller specifically warrants or guarantees the condition of the property, then no such warranty will be implied. However, the seller cannot hide or conceal known defects, especially those which affect the health and safety of the purchaser. New construction requires the issuance of a warranty in accordance with Maryland law. Most standard contracts, subject to certain exceptions, indicate that the property is sold “as is.”
The above principles should not be interpreted to require the seller to report to the purchaser every known minor repair or defect which may have occurred in the history of the house. Such a requirement would be unreasonably burdensome on the seller, and Maryland law would not create such an obligation. However, Maryland has enacted a mandatory property condition disclosure law. The real estate agent can assist the buyer and seller with the required disclosure forms.
Some standard contracts contain certain express warranties. For example, in the Property Condition paragraph of the Maryland Contract, the seller warrants that the property will be in substantially the same physical condition as of the date of contract acceptance. Therefore, if the hot water heater breaks one week after final ratification of the contract, but prior to settlement, then the seller must repair or replace the hot water heater. Additionally, in some contracts the seller generally certifies that the electrical, plumbing, heating, air conditioning, appliances and other mechanical systems will be in working condition at the time of settlement. These items may not be in brand new, perfect condition, but they must be in general operating condition. This provision, however, does not mean that the seller will warrant or guarantee the condition of these items after settlement. However, the Maryland contract states that the property is sold “as is.”
Regardless of whether or not the seller elects to provide the purchaser with a separate commercial warranty protection plan or make any express warranties in the contract of sale, sellers should be very careful to repair or replace any known defects or adequately disclose those defects to the purchaser prior to entering into the contract. If a house contains any severe defects of which the seller has knowledge, they will be better served by having those items repaired prior to entering into a contract, rather than being sued by a disgruntled purchaser after settlement.