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A recent case discussed the doctrine of caveat emptor as applied to New York real estate transactions.
The plaintiffs, as purchasers, entered into a contract with the defendants, as sellers, to purchase residential property in Suffolk County. The plaintiffs commenced this action to recover damages for fraud after discovering, subsequent to the closing, that the property had suffered extensive damage due to leaking water. The complaint alleges that the defendants made cosmetic repairs to actively conceal the existence of leaks and water damage to the property, including placing new wood on top of rotten wood to hide the extent of the damage. The trial court dismissed the complaint on the grounds of caveat emptor. The plaintiffs appealed, arguing that they had sufficiently pleaded a cause of action for fraudulent inducement and concealment.
The Appellate Court stated the rule of caveat emptor as applied to New York real estate transactions:
“New York adheres to the doctrine of caveat emptor and imposes no liability on a seller for failing to disclose information regarding the premises when the parties deal at arm's length, unless there is some conduct on the part of the seller which constitutes active concealment…If, however, some conduct (i.e., more than mere silence) on the part of the seller rises to the level of active concealment, a seller may have a duty to disclose information concerning the property…. To maintain a cause of action to recover damages for active concealment, the plaintiff must show, in effect, that the seller or the seller's agents thwarted the plaintiff's efforts to fulfill his [or her] responsibilities fixed by the doctrine of caveat emptor.”
The Appellate Court determined that the complaint sufficiently stated a cause of action to recover damages and reversed the order of the trial court.
The bottom line: it’s buyer beware in residential real estate transactions, but the seller can’t actively conceal faults.
The case is Striplin v. AC&E Home Inspection Corp., No. 10124/15, 2023 WL 4340330 (N.Y. App. Div. July 5, 2023).
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