Expert: Timmy Chou - 8/8/2009

Question
We purchased a building for a retail space and residence. The owner indicated on the disclosure statement that the building was air conditioned. He was half right. the top floor had an central air conditioning unit on the roof. We didn't realize until the following spring on the first hot day, that the bottom floor (retail space) was not air conditioned. Interestingly he had a heating and cooling business in the space prior to our purchase. We talked to the agent, the broker, and our bank president - to no avail. Do we have any legal recourse. The purchase took place in Missouri Nov. 2006. Thank you.

Answer
Thank you for your question!

As I always mention to questioners, mediators act as neutral third parties to disputes and never "get involved" in judging the merits of conflict, but merely use special techniques to help the parties decide how to negotiate their own settlement. The case you describe here is unfortunately very typical.  I am not a lawyer, nor can I mediate your dispute with just you alone but I can respond to your question from my business consulting experience.  You may wish to consult an attorney.

In my experience the burden is unfortunately heavily on you to do your due diligence and determine all hidden items in most cases.  Unless you can prove an "intent" to defraud it is usually a difficult matter.  It appears that the seller could argue that the question of the presence of AC is answered honestly, but the question of the extent of the AC service was not asked.  The major requirement of sellers is to not tell lies, rather than to disclose every little creak and crack.  After all the sellers are not presumed to be licensed contractors or necessarily knowledgeable about construction or codes.  Some of what you describe may be sketchy.  If you can identify any examples of clear dishonesty you may have a stronger position.   

The seller is not obliged to consider what issues you might consider material, only the issues the seller believes are material, and this materiality debate usually is won by the seller, as you are charged with proper due diligence -- despite what is or is not alleged by a seller.  Nevertheless, there may be more case law or statutory law on this issue in your state that further defines playing in-bounds and you may have grounds here.  As I have said, the burden is on you to prove that there was clear dishonesty.  The seller can disclose what he wants but what the seller cannot do is lie.  

Again the burden is on buyers to do their due diligence during the purchase and not to rely on amateur sellers disclosing things they may not know a thing about.  If you can prove a deliberate fraud and you will prevail here, but be prepared to have to spend considerable funds on lawyers and experts -- and you also must determine whether the seller even has anything to recover before spending all this money.

Be sure you document all contracts and every instance of meetings and discussions. Be as detailed as possible.

These are some ideas.  Feel free to follow up with additional questions.

In all my answers, and for your information, the pros and cons of the types of dispute resolution are provided below.

GOOD LUCK!

Arbitration, Mediation, and Litigation

Arbitration: the referral of a dispute to one or more impartial persons for final and binding determination outside of the judicial system

Benefits of Arbitration:

  Confidential, no public record
  Limited exchange of documentation, information
  Quick, don't have to wait for a court date
  Arbitrators have expertise in the subject matter and are trained in conflict resolution
  Cheaper than litigation
  Preserves business relationships

Negatives of Arbitration

  It's a compromise, no %100 winner
  Complex arbitration can be costly
  If not satisfied, may litigate the arbitration procedure
  Poor results with an unskilled arbitrator
  Both parties must agree to cooperate in the process

Mediation: the process by which parties submit their dispute to a neutral third party (the mediator) who works with the parties to reach a settlement of their dispute.

Benefits of Mediation:

  Neutral mediator can objectively suggest alternatives not considered before
  Parties are directly engaged in negotiating the settlement
  Can be quicker than litigation
  Less costly than litigation
  Preserves business relationships
  85% of American Arbitration Association cases mediated find successful solutions

Negatives of Mediation

  may not reach a binding decision
  unskilled mediator

Litigation: using the judicial system to resolve disputes

Benefits of litigation:

  a clear winner and loser
  uses a prescribed set of procedures
  more predictable outcomes
  is final

Negatives of Litigation:

  waiting for court dates can do more harm
  usually more expensive than mediation and arbitration
  part of the public record