THE BASEMENT FLOODS WHEN IT RAINS: MUST A SELLER DISCLOSE?
by Christopher P. Parnagian and Diana Chen (Winter 2008-9)

Over the years, various OP clients have asked whether they are required under New York law to disclose known defects in the residences they are selling. For example, must a defect like bad air quality produced by a built-in air conditioning unit, a leaking underground storage tank, or a basement that regularly floods be disclosed?

Generally, the answer is "no." The usual rule in New York is caveat emptor, or "buyer beware." As long as the seller stays silent, New York courts have placed the responsibility on the buyer to discover defects. There are, however, four limited exceptions to this rule. Specifically, a seller must disclose if he or she: (i) has a confidential or fiduciary relationship with the buyer; (ii) actively conceals the defect; (iii) makes an affirmative misrepresentation in respect of the defect; or (iv) makes only a partial disclosure of the defect. If these exceptions are avoided, then the existence of the defect need not be disclosed.

O'Hare Parnagian LLP advises clients on business and finance transactions and commercial litigation and handles a wide range of real estate matters. If you have questions about this memorandum, please contact Christopher P. Parnagian at (212 425-1401 or cparnagian@ohareparnagian.com. General information about the firm may be obtained at www.ohareparnagian.com.