Unfortunately, when someone buys a house, the goods sold are not always as advertised. Only a relatively small percentage of purchased homes are new construction. The majority of homes have been lived in, maintained, and possibly renovated prior to being sold. Home buyers often have to rely on the seller’s representations to know the condition of the home. What happens when the home sold is not in the condition represented by the seller?
A home buyer faced with this challenge may be able to pursue claims against the seller including for breach of contract and breach of implied warranty. What damages can the buyer recover?
Under Maine law, and depending on the specific facts of the case, a home buyer may be able to recover compensatory damages, including repair costs, diminished value, and consequential expenses, as well as potential rescission of the contract, punitive damages for fraud or violations of the Maine Unfair Trade Practices Act (“UTPA”), and attorneys’ fees. The most supportable damages are those based on repair costs and market value loss, which should be calculated using credible expert estimates and documentation of out-of-pocket expenditures.
The purpose of damages in a case like this is “to place the injured parties in the position they would have been in but for the breach, by awarding the value of the promised performance.” Anuszewski v. Jurevic, 566 A.2d 742, 743 (Me. 1989). Damages can be measured by “either the difference in value between the performance promised and the performance rendered, or the amount reasonably required to remedy the defect.” Id. However, the cost of remedying a defect is often greater than the decrease in the home’s value due to the presence of the defect. To recover damages equal to the remedial costs, the buyer must demonstrate that the defects are significant enough to justify recovering this higher amount—e.g., the defect is significant enough that it must be undone. Smith v. Urethane Installations, Inc., 492 A.2d 1266, 1268–69 (Me. 1985).
That said, some Maine courts have indicated a practical preference for cost-of-repair damages in cases where repairs are feasible and necessary to deliver the promised performance. See, e.g., Anuszewski v. Jurevic, 566 A.2d 742 (Me. 1989).
In some cases, where the cost of repair does not fully compensate the buyer, it may be possible to recover damages for both the cost of repair and the decrease in value. See, e.g., Marchesseault v. Jackson, 611 A.2d 95 (Me. 1992). One such situation in which this may occur is when lingering structural or aesthetic defects would still diminish a home’s market value even after the defect has been repaired. Id.
Apart from the breach of contract damages discussed above, Maine also recognizes an implied warranty in the sale of newly constructed or substantially renovated homes, that the work was performed in a reasonably skillful and workmanlike manner and that the home is fit for habitation. Wimmer v. Downeast Props., Inc., 406 A.2d 88, 92 (Me. 1979).
If a home buyer can demonstrate that the seller knew about the defects prior to the sale, that the seller knowingly or carelessly made false statements or failed to disclose those defects, and that the buyer justifiably relied on sellers statements to their own detriment, a home buyer may also be able to recover damages under theories of negligent or fraudulent misrepresentation. See Letellier v. Small, 400 A.2d 371, 376 (Me. 1979); Guiggey v. Bombardier, 615 A.2d 1169, 1172 (Me. 1992); Rand v. Bath Iron Works Corp., 2003 ME 122, ¶ 9, 832 A.2d 771. The seller’s agent may also be held liable if they knew of the defects and knowingly or carelessly made false statements or failed to disclose those defects. Kezer v. Mark Stimson Assocs., 1999 ME 184, ¶¶ 24–25, 742 A.2d 898.
A home buyer may be entitled to recover consequential damages stemming directly from the breach of contract and misrepresentations, such as temporary relocation expenses, remediation costs, and expenses for expert inspections and testing.
A final, noteworthy avenue to recovering damages is Maine’s UTPA, 5 M.R.S. § 207, which prohibits unfair or deceptive acts in trade or commerce, including real estate transactions involving misrepresentations or omissions of material fact. 5 M.R.S. § 207. Under Maine law, deceptive practices in the marketing and sale of homes, including misstatements or omissions about construction quality, may support liability under both common law and the UTPA. See State v. Weinschenk, 2005 ME 28, ¶¶ 12–15, 868 A.2d 200. In Guiggey v. Bombardier, the court held that concealment of material facts by a seller can violate the UTPA where there is a duty to disclose. 615 A.2d 1169. A knowing failure to disclose construction defects, particularly in a newly renovated home, constitutes a deceptive practice when the sellers are in a position of superior knowledge. If proven, UTPA violations entitle Plaintiffs to actual damages, attorneys’ fees. See 5 M.R.S. § 213(1).
Claims for misrepresentation and violations of the UTPA may strengthen a home buyer’s case by exposing the seller’s failure to disclose known, material defects during the sale of a home. These statutory and tort-based claims may also support additional remedies including rescission, punitive damages, and attorneys’ fees, especially if a court finds that the seller acted knowingly or in reckless disregard of the truth.