Tennessee Residential Property Disclosure Act

Fraud/Fraudulent Concealment/Misrepresentation

A buyer of a residential property in Tennessee has several potential avenues for obtaining legal relief where the buyer has purchased property with a defect or where the disclosure form provided to the buyer was inaccurate or incomplete . A buyer may bring a lawsuit under the Tennessee Residential Property Disclosure Act, Tenn. Code Ann. §66-5-201 et. seq. A buyer may also assert common law claims for causes of action which existed before enactment of the Tennessee Residential Property Disclosure Act for fraud, fraudulent concealment, misrepresentation or even breach of contract/breach of warranty. In many, if not most cases, a claim under the Tennessee Residential Property Disclosure Act will be combined with one or more of the aforementioned common law claims.

Basic Provisions of the Tennessee Residential Property Disclosure Act

The Tennessee Residential Property Disclosure Act requires a seller of residential property which is covered by the Act to provide a potential purchaser of the property with a completed and signed disclosure form. A seller is not required to complete and sign a disclosure form where the seller provides the buyer with a disclaimer statement that states the seller makes no warranties and that the property is being sold “as is.” Such a disclaimer may be used only where the buyer waives his or her right to a disclosure form.

The Act applies to all sales of residential real property consisting of not less than one dwelling unit, but not more than four dwelling units. The Act applies even if real estate agents are not involved in the sale. The disclosure form required in Tennessee is lengthy, detailed and comprehensive.

Under the Act, a seller must disclose material defects of which the seller has knowledge. A seller is not required to disclose defects of which the seller is not aware. Moreover, a seller is not required to obtain an inspection or make an independent investigation before completing the form. The seller can lawfully complete the form by relying strictly on his or her knowledge.

Often, the issue in lawsuits involving the Act is whether or not the seller had knowledge of some defect of which he claims he did not, but which was discovered by the buyer after the sale. In such cases, the determination of whether or not the seller is being truthful when he claims no knowledge of the defect is based on circumstantial evidence and the evaluation of seller’s and buyer’s credibility by the judge or jury.

Even if the seller fails to disclose the existence of a defect of which the seller did have knowledge, nevertheless, if the buyer was aware of the defects or they were observable by the buyer by the use of careful observation. To be held liable under the Act, a seller does not have to prove that the buyer intentionally failed to disclose a defect of which the seller had knowledge.