In the recent case Gholston v. Sherrill, the Michigan Court of Appeals held that contaminated groundwater beneath a home can qualify as an environmental hazard under the Seller’s Disclosure Act (the “Act”), thereby requiring disclosure to potential buyers.
The case involved the sale of a home near a former General Motors manufacturing plant, where trichloroethylene (“TCE”), a carcinogen, had contaminated the groundwater. Through a process known as “vapor intrusion,” TCE can enter homes through openings in the floors and walls and affect humans if they drink contaminated water or breathe contaminated air.
Several years before selling their home, the sellers received notice that TCE-related vapors were detected in the ground near their home. As required by the Act, the sellers completed a Seller’s Disclosure Statement (“SDS”). However, on the SDS, the sellers represented that there were not any environmental problems associated with the house. Relying upon this, the buyers agreed to purchase the home. Soon after, the buyers learned about the TCE contamination and sought to rescind the agreement. The buyers sued the sellers for violating the Act, fraudulent misrepresentation, and silent fraud.
The court held that TCE contamination in nearby groundwater qualified as an “environmental hazard,” which the court defined as:
an unacceptable risk to a person’s health, safety, or welfare posed by the presence of a substance, material, or product in the soil, surface water, groundwater, air, or building materials associated with the subject property.
As such, the defendants were required to disclose the presence of TCE and the possibility of contamination.
Going forward, sellers should exercise more caution when completing an SDS, as they are expected to disclose known environmental risks, even if they do not directly impact the home’s current use. Even though sellers are not required to be “omniscient,” they are expected to employ good faith and honesty in their disclosures.
When in doubt, it is safer to disclose potential issues or admit lack of knowledge rather than risk legal liability for misrepresentation. If you have questions about the purchase or sale of a home, or need assistance with disclosure requirements, contact our team today.