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In Simone v. Homecheck Real Estate Services, Inc. , Peter Simone filed a lawsuit seeking to recover damages for fraud and breach of a contract of sale. Simone purchased a home from James and Margaret Cleary and not only alleged that the Clearys provided false information on a Property Condition Disclosure Statement ("Disclosure Statement"), but that they intentionally concealed the defective conditions.

In connection with the property's sale, the Clearys supplied a Disclosure Statement which indicated that there were: "no material defects in the footings; no rotting or water damage; no flooding, drainage, or grading problems that resulted in standing water or any portion of the property; no seepage in the basement that resulted in standing water; and no known material defects in the plumbing system, foundation/slab, interior walls/ceilings, exterior walls or siding, floors, chimney and patio/deck, and that no radon test had been done."

Although Simone had hired Homecheck Real Estate Services, Inc. to perform a home inspection, the company's report revealed no material property defects.

After the closing, Simone discovered a number of material irregularities which included: "water leaking through the porch; the rear deck sinking because of excessive water and pooling of water; the roof separating from the rest of the house due to the deck sinking; improper footing on the deck; mold behind the sheetrock caused by water in the basement; the radon system blower was inoperative; a cracked chimney, rotted bathroom floors due to excessive water leakage; and evidence of long-term heavy water damage on the garage roof and walls."

After Simone's case was filed, the Clearys moved to dismiss the complaint against them. While the Westchester County Supreme Court denied the Clearys' motion, the Appellate Division, Second Department, modified the outcome.

According to the AD2, New York law "imposes no liability on a seller for failing to disclose information regarding the premises when the parties deal at arm's length, unless there is some conduct on the part of the seller which constitutes active concealment." Thus, in order for a buyer to maintain an action for fraud, the seller must have engaged in some deceptive act or conduct, and not just have been silent.

The AD2 found that "[w]hen a seller makes a false representation in a Disclosure Statement, such a representation may be proof of active concealment." Assuming Simone's allegations to be true for purposes of this kind of motion, the AD2 held that the lower court properly denied the branch of the Clearys' motion to dismiss the fraudulent misrepresentation claim, as it was alleged that the Disclosure Statement they contained false representations.

The AD2 did not agree with the lower court's disposition of Simone's breach of the contract claim.  The agreement "specifically provided that the premises had been inspected by [Simone] and was being sold 'as is' without warranty as to condition, express or implied." In addition, title had closed and the deed was delivered. As a result, a legal doctrine known as "merger" ended any possible cause of action Simone had with regard to the contract. That being the case, the AD2 granted that branch of the Clearys' motion which sought dismissal of the contract breach claim.

Please, don't take our word for it.

For a copy of the Appellate Division's decision, please use this link: Simone v. Homecheck Real Estate Services, Inc.