Statute of Limitations Regarding Liability of Sellers and Brokers

Question: Your column recently discussed the liability of the seller for failure to disclose to the buyer that the City of Chandler had not approved the completion of the garage. In another column you discussed the liability of the seller and the real estate broker for failing to disclose to the buyer a leaky roof, or a high concentration of radon gas or land fissures in the neighborhood. If there is liability to the buyer in these scenarios, how long does a buyer have under the statute of limitations to file a lawsuit against the seller or the real estate broker?

Answer: In general, if the seller or a real estate broker has actual knowledge of a material problem, e.g., an uncompleted garage, a leaky roof, or a high concentration of radon gas or land fissures in the neighborhood, and fails to disclose this material problem to the buyer, that is fraud. The statute of limitations for fraud requires a buyer to file a lawsuit against the seller within three years after the fraud is discovered, or should have been discovered, by the buyer. A.R.S. §12-543(3). If the seller had no actual knowledge of a leaky roof or other material problem, there is no liability of the seller to the buyer. However, if the real estate broker in the transaction should have known of the leaky roof or other material problem, that is professional negligence of the real estate broker. The professional negligence of a real estate broker is similar to the professional negligence of a physician, an architect, or surveyor, namely, two years from when the buyer knew, or should have discovered, the professional negligence. A.R.S. §12-542.

Note: A new home buyer has eight years after completion of the new home to file a claim against a homebuilder for a construction defect. A.R.S. §12-552. Even a subsequent buyer of the new home has up to eight years after completion of the home to bring a claim against the homebuilder for a construction defect, if the subsequent buyer had a home inspection which failed to discover the construction defect.