Material Misrepresentation—A Legal Issue

Alabama License Law Protects Consumers

Alabama License Law Section §34-27-36 (a) (3).  Making a material misrepresentation, or failing to disclose to a potential purchase or lessee any latent structural defect or any other defect known to the licensee. Latent structural defects and other defects do not refer to trivial or insignificant defects but refer to those defects that would be a significant factor to a reasonable and prudent person in making a decision to purchase or lease.

Let’s examine material misrepresentation in first part of that law. First let’s look at the word material. Many people think material refers to the physical elements that make up a house such as sheet rock, flooring, roofing, wood, windows and etc. It does but it also refers to non-physical things such as mental implications. Webster’s Dictionary says, “material relates to matter rather than form, or relating to the subject matter of reasoning.

 Before we put these two words together, Webster’s Dictionary says misrepresentation means, “to give a false or misleading representation of; and also to serve badly or improperly as a representative of.” I commonly think misrepresentation is opposite of the truth.  Let’s add another wrinkle into the equation.  According to Alabama License Law Section §34-27-81 (12). A material fact is defined as “a fact that is of significance to a reasonable party which affects the party’s decision to enter into a real estate contract.”

 With these thoughts in mind, let’s draw some conclusions. As a real estate agent, anything that I might say or do something, that might influence a person in their decision to buy or sell real estate is a material fact. Misleading or misrepresenting a fact is misrepresentation. Sometimes not saying anything at all, especially if gestures, facial expressions, or body motions are used, an affective message was implied. According to Charles Sowell, Sr. Counsel for the Alabama Real Estate Commission, all the words following “making a material misrepresentation” could be omitted because “Caveat Emptor” nullifies the rest of that statement. Caveat Emptor means “Buyer Beware.” To state it simply, it means it is the responsibility of a buyer to know what they are buying, and what condition it is in. I’ll cover this topic in more detail in a later writing.

 Let’s look at the remaining part of the law that we began with. Failing to disclose to a prospective purchaser any latent structural defect or any other defect known to the licensee. Latent structural defects and other defects do not refer to trivial or insignificant defects. Latent means hidden, not visible, not active or dormant. Latent means it isn’t a problem at the current time but it could become a problem in the future. Structural refers to the physical make of a dwelling that provides stability. These are pillars, foundation, walls, support items. It would definitely be of significant interest to a prospective buyer to know that there might be hidden defects in the structure of a house. Nobody wants to buy a house and have it to fall in on them. As a real estate agent I must disclose this information if I know about it.

 There is another issue that enters into whether I’m required to disclose information or not but time will not permit discussing it today. I will tell you it deals with Agency law; that is who I represent, and also Caveat Emptor. I will cover these issues in a following issue.

 Should you have specific questions concerning various issues, please let me know and I’ll research the answer for you. I want to encourage you to subscribe to our “News & Updates” weekly report so you can stay abreast of issues that might affect you when buying or selling real estate.