One of the standard Seller representations is that Seller has no “actual knowledge of any liens or assessments to be levied against the Property, of any boundary disputes or encroachments related to the Property, of any violation of law related to the Property, or of any material defects related to the Property not otherwise described in this Agreement or in any addenda thereto or in a Seller’s Property Disclosure Statement (if provided to Buyer).” (lines 270-273 of Form 1.1).
Questions arise on occasion as to what a “material defect related to the property” may be. Any condition related to the property that would affect a reasonable buyer’s conduct in reference to the transaction, including a reasonable buyer’s willingness to purchase the property and/or the price and terms under which they would be willing to purchase the property, should be presumed to be a “material defect.” See Millikin v. Green, 283 Or. 283, 583 P.2d 548 (Or. 1978). Things like presence of Radon or electromagnetic fields or closeness to toxic facilities (the classic example is a cement factory upwind from the house) can be considered material issues and if the Seller knows about these issues, the Seller must disclose them.
ORS 93.275 establishes a few facts about property that are “not material” by law. Specifically, the following are legally defined as non-material facts and would not require disclosure under the Sale Agreements:
- The fact or suspicion that the real property or a neighboring property was the site of a death by violent crime, by suicide, or by any other manner;
- Note – This is just the property being the site of a death. For example, if there are rumors that the property’s previous owner died there, that fact is immaterial and does not need disclosure.
- By contrast, if there is a body buried on the property, that’s material. A Buyer finding a femur while planting tulips in their new garden will create very real issues for that Buyer. These issues can occasionally result in a lawsuit against the Seller if the Seller chose not to disclose that they had privately buried a family member in the back yard.
- Death is immaterial, but the physical location of the burial is quite material.
- The fact or suspicion that the real property or neighboring property was the site of a crime, political activity, or religious activity or any other act or occurrence that does not adversely affect the physical condition of or title to real property;
- Note – Things like doors being bashed in during a robbery are immaterial as long as the door has been replaced or repaired. If, on the other hand, a crime was committed that leaves lasting impacts [e.g. Meth was cooked on the property and the chemicals are present in dangerous quantities in the walls], the fact of that crime should be disclosed and is material.
- The fact or suspicion that an owner or occupant of the real property has or had a blood-born infection;
- Note – ORS 93.275(2) states that the legislature found no risk of transmission of HIV or AIDS by casual contact, so a previous inhabitant having HIV or AIDS would not be a material fact.
- The fact or suspicion that a sex offender resides in the area; and
- The fact that a notice has been received that a neighboring property has been determined to be not fit for use under ORS 453.876 [generally referring to illegal drug manufacturing sites].
The Seller is under no obligation to disclose the above facts, but may disclose them if the Seller chooses to do so. As a broker, you should not disclose the above facts unless you have discussed the disclosure with your client and received their permission first.