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Fraud Allegations In Connection With a Real Estate Sale Must Be Analyzed within the Doctrine of Caveat Emptor

The Second Department, reversing Supreme Court, determined plaintiffs’ complaint alleging fraudulent misrepresentation and fraudulent concealment in connection with a real estate purchase should have been dismissed. It was alleged the defendant made misrepresentations re: termite damage and mold. The court explained that allegations of fraud in a real estate transaction must be analyzed within the doctrine of caveat emptor. Here the plaintiffs were aware that the house had been treated for wood destroying insects, an inspection report had been issued, and plaintiffs had conducted their own inspection. The defendant made no representations on which plaintiffs relied and did not actively conceal the condition of the property or thwart plaintiffs’ efforts to discover damage:

“In an action to recover damages for fraud, the plaintiff must prove a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury” …  . However, in the context of real estate transactions, a claim of fraudulent misrepresentation must be analyzed within the doctrine of caveat emptor. ” New York adheres to the doctrine of caveat emptor and imposes no duty on the seller or the seller’s agent to disclose any information concerning the premises when the parties deal at arm’s length, unless there is some conduct on the part of the seller or the seller’s agent 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'” … . Here, the defendant showed, prima facie, that she did not thwart the plaintiffs’ efforts to discover any termite or mold damage. Indeed, the plaintiffs conducted an inspection of the property for the purpose of determining if there were wood destroying insects, and they themselves saw some evidence that the property had been treated for insect activity during their … visit, but undertook no further investigation … . The mere fact that the defendant undertook previous repair work on the house is not tantamount to concealment of a defective condition.  Hecker v Paschke, 2015 NY Slip Op 08385, 2nd Dept 11-18-15

 

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