What Must You Tell Buyers?
Tennessee is what is known as a full disclosure state, meaning that the seller of residential property must disclose all known material defects to the buyer before or at the time an offer is made. According to Tennessee Code Annotated § 66-5-202, the owner of residential property must provide to the buyer one of the following:
- A full disclosure of material defects known to the seller, including a notice to the buyer that professional inspections may be advised, that seller disclosures aren’t the representations of the real estate licensees involved, and that the seller won’t be conducting any independent investigation or inspection to make the disclosures.
- A statement that the seller makes no representations or warranties as to the property or buildings on it and that the buyer will be receiving the property as-is, with all defects that may exist, unless otherwise provided in the purchase contract. (Note: Only if the buyer waives the right to the required disclosure.)
What Defects are Material in Tennessee?
The term “material defects” is not explicitly defined by statute, so it can be a point that is often litigated. Luckily, Tennessee’s legislature has created a model form within Tennessee Code Annotated § 66-5-210 which can fulfill the requirements of full disclosure. This same form was posted online by the Tennessee Realtors Association as a fillable PDF: TN Property Disclosure.
Some examples of what is considered “material defects” are defects or malfunctions in the floors, windows, plumbing system, electrical system, roof, central air conditioning, and much more. Other unique disclosures that must be made if known in Tennessee are the existence of sinkholes, Planned Unit Developments, Injection Wells, and foundation issues. It is important to note that these disclosures only have to be made if they are “known” by the seller. The seller has no duty to discover defects or perform research on the home. The seller must simply tell the truth based on his or her own knowledge.
What Defects are Not Material in Tennessee?
Several issues are not considered material in Tennessee and therefore do not have to be disclosed. According to Tennessee Code Annotated § 66-5-207, there is no duty for sellers to disclose that a previous occupant suffered with HIV or any other disease which is highly unlikely to be transmitted through the occupancy of the property. There is also no duty to disclose if a homicide, felony, or suicide occurred in the home. While a buyer may want to know about these topics, the legislature has decided that the privacy of the former owners ranks higher in importance in these circumstances.
What if I Fail to Disclose Material Defects?
If a seller fails to disclose material defects, the buyer will have several remedies to choose from. One option for the buyer is to bring an action against the seller for actual damages suffered as a result of the defects. Another option for the buyer is to terminate the contract prior to closing. The buyer also has the choice to bring other remedies at law or equity that are available.