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August 2008

Court May Weaken Home Buyers’ Protections

In a 4–3 vote July 1, the Wisconsin Supreme Court issued a surprising decision that some consumer advocates believe may substantially reduce buyer protections when purchasing a home. The decision, Shannon Below v. Dion R. Norton, involved a purchaser of a home on Milwaukee’s South Side in February of 2004. The sellers had completed the property condition report that is required by Wisconsin law when they put their house on the market. In the report, the sellers said they were not aware of any defects with the house’s plumbing system except for a problem with a bathtub drain handle. Unfortunately, the buyer closed on the sale of the home before finding that the home’s sewer line between the house and street was broken.

The buyer sued the seller in Milwaukee County Circuit Court, claiming a variety of misrepresentations. The buyer alleged that the seller knew of the sewer-line defect and failed to disclose this condition. The Circuit Court dismissed the buyer’s case in November 2005. The buyer appealed the decision to the Court of Appeals and that court held that the buyer could pursue a false-advertising claim.

The buyer then appealed the case to the Wisconsin Supreme Court. The court’s majority held that a buyer could not sue a seller for fraud to recover damages arising from the seller’s failure to disclose a defect to the buyer. The majority found that Wisconsin law only provides a buyer with the ability to sue for a misrepresentation and to recover any loss, including reasonable attorneys’ fees.

Justice Ann Walsh Bradley, in her dissenting opinion, said the court’s majority removes the ability of a buyer to sue for punitive damages and means, “A person selling a home can look the buyer in the eye, lie about the conditions of the home, and escape legal consequences.” Bradley went on to say the majority justices were, in effect, creating their own law. She was joined in her dissent by Chief Justice Shirley Abrahamson and recently defeated Justice Louis Butler.

The Milwaukee Journal Sentinel said case observers are divided about the decision’s impact on home buyers and sellers. The attorney representing the seller, Vicki Zick, stated the case “really just says we’re not going to let you sue for huge punitive damages.” However, attorney Steve Meili of the Consumer Law Litigation Clinic at the University of Wisconsin Law School argues the decision is bad for home buyers because “ripped-off home buyers can’t be awarded punitive damages.” Debbie Conrad, attorney for the Wisconsin Realtors Association, stated the decision “kind of creates a world where it’s buyer beware a bit more.”

This case once again demonstrates that a buyer should be very careful when purchasing a home and should have a qualified home inspector carefully examine the dwelling for potential defects before money is exchanged. 

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