Buying or Selling Maine Real Estate? Here are a Few Guideposts

By: Rudman Winchell Attorney Jonathan Bench
Buyer beware. Sellers of real estate in Maine have no obligation to disclose property defects to buyers[1],
and agents have all of the defenses as their principals that arise out of the transaction.[2] Failure to disclose defects in real property generally falls under two headings: (1) fraud, and (2) negligent
misrepresentation.
To prevail on a claim of fraud, a plaintiff must demonstrate an active concealment of the material
truth, or a special relationship that imposes a duty to disclose on the
defendant.[3] Choose your words carefully. A party who makes a partial disclosure where
none is required is deemed to have assumed a duty to make a full disclosure.[4]

Negligent misrepresentation occurs when a party fails to comply with an absolute statutory or regulatory duty to
make a disclosure.[5] For instance, a seller’s agent must disclose
in a timely manner to a prospective buyer all material physical defects of
property of which the seller agent knew or, acting in a reasonable manner,
should have known. But a real estate brokerage agency is not liable to a buyer for providing false information to
the buyer if the false information was provided to the real estate brokerage
agency by the real estate brokerage agency’s seller-client and the real estate
brokerage agency did not know or, acting in a reasonable manner, should not
have known that the information was false.[6]

Several Maine cases provide further guidance. In Binette v. Dyer Library Association[7],
the Plaintiff asserted Defendants supplied false information regarding
underground oil tank existence because Defendants did not comply with an
absolute statutory or regulatory duty to disclose the same. The Court held that for purposes of negligent misrepresentation, silence
rises to the level of supplying false information when such failure to disclose
constitutes the breach of a statutory duty.
Where there is a duty to disclose, unawareness or good faith is no
shield against Unfair Trade Practices Act (5 M.R.S.A. § 207) liability for
failure to disclose material information. The Court further indicated that even an isolated transaction in a
business context may constitute “conduct of trade or commerce” for purposes of
the UTPA. In Bradley v. Kryvicky,[8]
the court held that a claim for failure to inform purchaser of leaking roof was
not actionable in the absence of a special relationship unless the complaint
alleged and the plaintiff proved evidence of affirmative statements or acts
intended to deceive. In Kezer v. Mark Stimson Associates,[9]
Plaintiff homeowners asserted Defendants, members of a real estate brokerage,
were negligent because they owed Plaintiffs a duty to disclose contamination
issues in, on, or around the property they purchased. In the alternate, Plaintiffs asserted fraud
by active concealment of the contamination in the neighborhood surrounding the
property, even though the Plaintiff’s property was unaffected. The court found
no evidence that any environmental hazard affected or was spreading to the
property and held that 32 M.R.S.A. § 13273(2)(A) limited the duty of the
seller’s real estate agent to disclose “all material defects pertaining to the
physical condition of the property” and that the statute did not require disclosure
of environmental hazards in the neighborhood.

In Keegan v. Downing Agency, Inc.,[10] the Plaintiffs alleged that the Defendants, Plaintiff-Buyers’ real estate
agents, knew or should have known of the risk that lead-based paint was in the
house. The District Court held that there was a statutory duty (32 M.R.S.A. § 13274(1)) upon Buyers’ agent to
disclose to the Buyers the presence of lead-based paint hazards on the
property, as an extension of Seller’s agent’s statutory duty to disclose
certain physical defects in the property to the Buyers.

In 2007, the Supreme Judicial Court addressed the issue of attorney malpractice in title work in Dowling v. Salewski.[11] There, the plaintiff real estate buyers
brought a legal malpractice action against the bank’s closing attorney (who the
jury at the Superior Court level previously found to have represented the
plaintiff buyers, in addition to the bank) to recover for negligence at closing
in connection with purchasers’ mistaken belief about acreage conveyed. The plaintiffs did not purchase title
insurance, and the defendant attorney did not render a title opinion, although
at closing he told the plaintiffs that their title was “good” and “clear,” even
though the deed presented by the seller’s attorney at closing covered only 10
of the 39 acres at issue. The attorney also told the plaintiff buyers that additional deeds would be coming in the
mail, though no deeds conveying additional acreage ever arrived. Although the Superior Court had entered
judgment for the plaintiffs on their negligence claim, the Supreme Judicial
Court held that the statute of limitations (14 M.R.S.A. § 753-B(1)) had run
with respect to the asserted negligence.

These cases were supplied for illustrative and not comprehensive purposes.
For additional guidance regarding your residential or commercial real
estate transactions in Maine, consult with a qualified attorney.

[1] See
Stevens v. Bouchard, 532 A.2d 1028, 1030 (Me.1987).

[2] See
Restatement (Second) of Agency § 334 (1958).

[3] See
Fitzgerald v. Gamester, 658 A.2d 1065, 1069 (Me.1995); Bradley v. Kryvicky, 574 F. Supp. 2d 210, 220 (D. Me. 2008).

[4] See Kryvicky, 574 F. Supp. 2d at 220.

[5] Binette v. Dyer Library Ass’n, 688 A.2d
898, 903 (Me. 1996).

[6] 32
M.R.S.A. § 13273(2)(A).

[7] 688
A.2d 898, 903 (Me. 1996).

[8] 574
F. Supp. 2d 210, 220 (D. Me. 2008).

[9] 1999
ME 184, 742 A.2d 898, 902.

[10] 03-56-P-H, 2003 WL 21210326 (D. Me. May 22,
2003).

[11] 2007
ME 78 (Me. 2007).