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Buyer Beware! Georgia Real Estate Law: Can A Home Buyer Sue A Seller After The House Is Sold? Part Two

Under Georgia law, can a home buyer sue a seller who is unhappy with the house? Unless the house seller is also the house builder, the answer is “Generally no.”

Fortunately for sellers, the law in Georgia protects home owners who sell their house to people who later suffer from “buyers remorse” and want to sue them to rescind the sale. Unfortunately for buyers, unless the seller was also the home builder, there is not much you can do to rescind a sale agreement even if the home seller fraudulently misrepresented or hid a housing defect. Nevertheless, the law is very specific, so if you find yourself in this situation, time is of the essence and it is imperative you seek competent legal counsel right away to ascertain your rights.

In general, home sellers are protected from home buyers who later try to rescind the sales agreement by several Georgia doctrines. Today’s article will discuss the Doctrine of Merger.:

Doctrine of Merger:

If the purchase and sales agreement contains a merger clause (which most do), the buyer cannot allege that the seller made any false representation outside of the Purchase and Sale Agreement that forms the basis of any of his claims because a Merger Clause expressly states: “No representation, promise or inducement not included in this Agreement shall be binding upon any party hereto.” This means even if the seller, prior to the purchase and sales agreement, lied to the buyer about the condition of the house or made false representations that were not included in the actual purchase and sales agreement–oftentimes the buyer will be out of luck and the seller will be protected from liability.

The rule in Georgia is that “[w]hen a home buyer elects to affirm a purchase agreement which contains a merger or entire agreement clause, he or she is precluded from recovering for the seller’s alleged fraudulent inducement based on misrepresentations made outside the contract.” Harkins et. Al. v. Channell et. Al. 174 Ga. App. 478, 481 (2005). This is why it is so important that home buyers take matters in their own hands and make sure the house is fully inspected prior to purchasing it. If there are specific representations that the seller has made that the buyer relies upon then they need to be included not only in the purchase and sales agreement, but also be included in the warranties that are transferred to the deed.

Consequently, if a seller, outside of the purchase and sales agreement, made willful fraudulent misrepresentations by concealing mold, termites, a leaking roof, or other defects—the buyer will often times have no recourse. The Georgia Court of Appeals has ruled that even if a Defendant seller was actively or passively concealing problems to make fraudulent misrepresentations outside of the contract in order to sell a house, that a buyer is entirely precluded from any type of fraud claim in the event of such a merger clause within the purchase agreement. Harkins et. Al. v. Channell et. Al. 174 Ga. App. 478, 481 (2005).

In this case of Harkins, the buyers who had bought 12 rental property homes, sought to rescind a sales agreement alleging fraudulent inducement based on representations by the sellers about the condition of the properties. The Court of Appeals was not sympathetic with the buyers for not sufficiently inspecting the properties. Id at 842. While the sellers did wrongfully make fraudulent misrepresentations about the condition of the properties to the buyers, and while they discouraged the buyers from inspecting the properties, they did not prevent them from doing so by fraud or artifice. Id.

The Georgia Court of Appeals has ruled that in this type of notice “sufficient to excite attention and put a party on inquiry shall be notice of everything to which it is afterwards found such inquiry might have led. Ignorance of a fact due to negligence, shall be equivalent to knowledge, in fixing the rights of the parties.” E.g. Harkins et. Al. v. Channell et. Al. 174 Ga. App. 478, 482 (2005); Westminster Holdings v. Weatherspoon, 237 Ga. App. 819 (1999).

Furthermore, the Plaintiff buyer has no right to rescind the contract and the Georgia Supreme Court has ruled for over fifty years as such: “Where one purchasing real estate [had] the opportunity, as the plaintiff here did, of examining it before buying, but, instead of doing so he voluntarily relies upon the statements of the vendor concerning the character and value, the contract will not be rescinded or set aside, or the purchase price of the land abated, because of the falsity of such statements, unless some fraud or artifice was practiced by the vendor to prevent such examination; and that this is true even though the vendee in buying the land may have acted upon the misrepresentations of the vendor or his agents.” E.g. Rush v. Autry, 210 Ga. 732, 733 (1) (1952) cited by Harkins et. Al. v. Channell et. Al. 174 Ga. App. 478, 482 (2005). Accordingly, “any remaining claim of misrepresentation or fraud based on statements” made outside of the agreement including about “the condition of the properties” must fail. Harkins et. Al. v. Channell et. Al. 174 Ga. App. 478, 481 (2005).

Thus the morale of the story is Buyer Beware! Regardless, if you are a home seller who is being threatened by a lawsuit, or if you are a home buyer contemplating a lawsuit against a seller—the laws are very specific to one’s situation and it is absolutely important that you seek competent legal counsel as soon as possible in order to protect your rights.