There’s an old proverb, “Let the buyer beware.” A recent opinion issued by the Michigan Court of Appeals (Galvan v Poon, Mich App No. 76047, August 19, 2021), however, has turned this time-honored legal principle a bit on its head.
In Michigan, state law requires us to disclose certain information about our home when we are selling. We meet those requirements by completing a Seller’s Disclosure Statement. Unless a seller fails to disclose a problem of which the seller is aware, a buyer generally has no recourse against a seller if a problem is discovered after closing.
A Warranty Deed provides additional protection for sellers by stating that the seller’s warranty of title is subject to exceptions such as existing building and use restrictions, easements of record and zoning ordinances. In other words, the buyer accepts title subject to certain encumbrances.
The Galvan decision has poked a hole in these seller safeguards. In Galvan, the Court ruled that building code violations discovered after buyers purchased a condo were the sellers’ problem even though the sellers were unaware of the violations. The Seller Disclosure Statement and the “subject to” language in the Warranty Deed afforded them no protection. In awarding damages to the buyer, the Court held that the violations were an encumbrance on title and were therefore a breach of the seller’s warranty of title.
The Galvan decision gives real estate buyers and sellers yet one more thing to negotiate. We’re already recommending additional language to protect our seller clients in their Listing Agreements, Purchase Agreements and Warranty Deeds. If you are contemplating a real estate sale or purchase, we would be pleased to guide you through. Contact us at (248) 477-6300 or email@example.com.