Questions of Fact Raised About Whether Sellers’ Representations on the Condition Disclosure Statement Claiming No Water-Related Problems on the Property Violated Real Property Law 462, 465, Constituted Fraud, and Constituted Breach of Contract

The Fourth Department determined the sellers’ representations on the condition disclosure statement created questions of fact about whether sellers violated Real Property Law 462 and 465, whether the sellers committed fraud, and whether the sellers breached the sales contract.  The sellers indicated on the condition disclosure statement that they had experienced no problems with standing water and water seeping into the basement.  There was evidence the sellers were aware of the existence of such water problems when they indicated on the form there had been none:

Real Property Law § 462 (1) requires sellers of residential real property to “complete and sign a property condition disclosure statement” and to provide such statement to a prospective buyer “prior to the signing by the buyer of a binding contract of sale.” Real Property Law § 462 sets forth the disclosure form, which instructs the seller to complete the form based upon his or her “ACTUAL KNOWLEDGE,” and contains the seller’s certification that “THE INFORMATION IN THIS PROPERTY CONDITION DISCLOSURE STATEMENT IS TRUE AND COMPLETE TO THE SELLER’S ACTUAL KNOWLEDGE AS OF THE DATE SIGNED BY THE SELLER.” Where a seller provides a property condition disclosure statement and “willful[ly] fail[s] to perform the requirements” set forth in article 14 of the Real Property Law “[such] seller shall be liable for the actual damages suffered by the buyer in addition to any other existing equitable or statutory remedy” (Real Property Law § 465 [2]). * * *

… [W]e conclude that plaintiff raised an issue of fact with respect to whether defendants knowingly misrepresented a material fact, i.e., the property’s history of flooding and standing water, on the property condition disclosure statement … . We likewise conclude that plaintiff raised an issue of fact with respect to whether he justifiably relied on defendants’ alleged misrepresentations … . * * *

Although the provisions of a contract for the sale of real property are generally merged in the deed and therefore extinguished upon the closing of title …, that rule does not apply ” where the parties have expressed their intention that [a] provision shall survive delivery of the deed’ ” … . Here, the contract provides that “[a]ny claim arising from failure to comply with Paragraph[] 5 [of the contract],” which encompasses defendants’ representations in the property condition disclosure statement, “shall survive for 2 years after the Closing or cancellation of this Contract” … . In any event, we note that “the merger doctrine [is] inapplicable where, as here, there exists a cause of action based upon fraud” … . Sicignano v Dixey, 2015 NY Slip Op 00054, 4th Dept 1-2-15