Question: I purchased an apartment building last spring
in Phoenix. In the purchase contract the seller stated that there
were no legal problems relating to the apartment building. After
we closed escrow we learned that the seller had been served by
the City of Phoenix with a criminal abatement notice relating
to a criminal activity occurring in the apartment building. Did
the seller have a duty to disclose this criminal abatement notice
to us? If so, can we rescind the transaction and get our money
back?
Answer: A seller of real property has a duty to disclose
any material and adverse fact affecting the value of the property.
This duty exists under common law whether or not there is specific
language in the purchase contract relating to warranties and representations
by the seller regarding the condition of the real property. In
my opinion the seller should have disclosed this criminal abatement
notice to you. Therefore, you should have a claim against the
seller for any loss in value of the apartment building because
the seller failed to disclose this criminal abatement notice to
you. You are probably not entitled to rescission, however, because
monetary compensation from the seller should be sufficient. Note:
Rescission of a transaction by the buyer generally requires a
breach by the seller that relates to the essence of the transaction.
For example, if a buyer pays $100 for 100 apples as provided for
in the contract, but the seller delivers 100 oranges, the buyer
should be able to rescind the transaction. In other words, a court
would order that the seller return the $100 to the buyer in exchange
for the buyer delivering the 100 oranges back to the seller.
