OH Court Rejects Lead-Based Paint Disclosure Lawsuit

Originally Posted By: gromicko
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An Ohio court has considered whether a dual agent could be liable to buyers for failing to discover and disclose the presence of lead-based paint.

Liz and Jamie Nunez ("Buyers") purchased a home from Ford Consumer Finance Company, Inc. ("Seller"). Real estate professionals Barb Carney and Neal Rakstang of Re/Max Home-Mart (collectively, "Licensees") served as disclosed dual agents for both parties in the transaction. Six months after the transaction was complete, the Buyers' children were discovered to have elevated levels of lead in their blood. The Cincinnati Health Department conducted testing at both residences (the Buyers still owned the previous residence), and both contained lead-based paint hazards. As a result, state law required the Buyers to abate the presence of lead-based paint in both residences.

The Buyers filed a lawsuit against the Seller and the Licensees, making numerous allegations over the failure to disclose the presence of lead-based paint in the Buyers' home. The Seller and Licensees argued that they had met their disclosure obligation under federal law. The trial court ruled against the Buyers on all allegations, and the Buyers appealed.

The Court of Appeals of Ohio, First District, affirmed the rulings of the trial court. The court first considered whether the Seller "knowingly" violated the required lead-based paint disclosures required under federal law. The federal Residential Lead-Based Paint Hazard Reduction Act of 1992 ("Act") and the supporting regulations impose certain disclosure requirements upon sellers/landlords and their representative for all housing transactions involving housing built prior to 1978, including the disclosure of all known lead-based paint on the premises.

The court determined that there was no evidence that neither the Seller or the Licensees had any knowledge of lead-based paint on the property and the Act imposed no affirmative duty upon them to discover the presence of lead-based paint. Further, the court stated that the Buyers were given an opportunity to inspect the property for lead-based paint (which they declined to do) and the Buyers also signed documents during the course of the transaction acknowledging that they understood potential risks of exposure to lead-based paint and understood they had the right to test the property for the presence of lead. Thus, the court ruled there was no knowing violation of federal law by the Seller.

Next, the court considered the misrepresentation claims made against the Seller and the Licensees. The Buyers argued that a fraudulent misrepresentation occurred when one of the Licensees allegedly stated that it would be a "waste of time" for the Buyers to inspect the property. In order to allege a fraudulent misrepresentation, a party shows (1) a statement (2) material to the transaction which is (3) made falsely with knowledge of its falsity and (4) with the intent of deceiving the party (5) who justifiably relies upon the statement, (6) suffering damages. Ohio law charges a party making fraud allegations with all knowledge about a property which a reasonable inspection would reveal, and also only makes a party liable for nondisclosure when the condition is latent or hidden and the seller knows of the condition. Here, there was no evidence that the Seller or Licensees had knowledge of the lead-based paint, and the Buyers had an opportunity to inspect the property, which would have revealed the presence of lead paint. Thus, the court affirmed the ruling of the trial court.

The Buyers also made negligent misrepresentation allegations against the Licensees. A negligent misrepresentation is made against an individual who in the course of their business supplies false information upon which they know that others will justifiably rely, causing the third party damages. Here, the court found that the Licensees had told the Buyers that the inspection would be a "waste of time" because the Seller had no plans to put any money into the property and would refuse to lower the purchase price. But there was no evidence that any false information about the property was given to the Buyers, and the Buyers had decided to not have an inspection of the property despite being told of the dangers of lead-based paint. Thus, the court affirmed the trial court's rejection of the misrepresentation allegations.

Finally, the court rejected the negligence and breach of fiduciary duty allegations made against the Licensees. In both cases, the court found that the Licensees only had a duty to disclose known defects on the property. Further, the Buyers were warned about the dangers of lead-based paint and waived their right to inspect the property for lead-based paint. Thus, the court rejected these allegations as well and affirmed the rulings of the trial court.

Nunez v. J.L. Sims Co., Inc., No. C-020599, 2003 WL 21473328 (Ohio Ct. App. June 27, 2003).