What actions can I take against a seller or realtor for failing to disclose a cesspool?

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What actions can I take against a seller or realtor for failing to disclose a cesspool?

We purchased a NJ house in 2011. The Certification says septic system the Uniform Residential Appraisal Report says public for water and sanitary sewer but we learned years later that we have a cesspool. Now we are looking to sell and learned that laws changed in 2012 to a required septic tank before settlement.

Are there any actions we can take towards the seller or realtor to either have this conversion covered or have the mortgage terminated? Thanks in advance.

Asked on March 10, 2019 under Real Estate Law, New Jersey

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 2 years ago | Contributor

1) You can't terminate the mortgage because the lender did nothing wrong here. The mortgage is a contract; your obligations under that contract, or the other party's rights (e.g. to be paid) are not affected by factors for which the other party was not at fault or responsible. The lender does not lose its rights because the seller did something wrong.
2) You *may* be able to sue the seller for compensation, but have two significant hurdles. First, the only grounds to sue them would be for fraud--for misrepresenting by failing to disclose. But you only commit fraud if you knew that what you were saying was false, or you were aware of the fact you failed to disclose: therefore, the seller would only be liable if the seller knew about the cesspool at the time they made their disclosures. If they thought they were on a sewer, they were not liable, since they would have honestly disclosed to the best of their knowledge. This means that to sue them and win, you'd have to be able to prove in court that they did or logically must have known about the cesspool.
Second, the statute of limitations, or time period to start a lawsuit, for fraud in your state is only 6 years after the fraud occured (i.e. after the failure to disclose). If you bought the house 8 years ago, you appear to be too late to take legal action, since once the statutory period has expired, you cannot sue. Sometimes, you can get some additional time if you can show that you did not and reasonably could not have discovered the fraud until later, but that is not a given; and if you found out about the failure to dislcose "years" ago (as you indicate), within the statutory period, the court would expect to have filed the case years ago, before running out of time. Therefore, there is a good chance that you are too late to sue.
3) You cannot sue the realtor: the realtor is not obligated to investigage the home to determine the facts, but rather is allowed to rely on what the seller tells the realtor.


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