No Knowledge Means no Liability

Ohio Court of Appeals, 2003: Nunez v. J.L. Sims Co. Inc.

September 1, 2004

An Ohio appellate court has ruled that sellers and their sales associates who were both unaware of the presence of lead-based paint in a home weren’t liable for negligence in failing to tell buyers about the paint. Six months after Liz and Jamie Nunez purchased a home, they discovered that their children had elevated lead levels in their blood. The Cincinnati Health Department tested their home and discovered it contained lead-based paint. Under Ohio law, the buyers were required to abate the lead-based paint in the home.

The buyers sued the sellers and the two sales associates, a team acting as disclosed dual agents, claiming they had knowingly violated the federal Residential Lead-Based Paint Hazard Reduction Act of 1992. The act requires that property owners or their agents in transactions involving homes built prior to 1978 disclose any known lead-based paint on the premises and provide a pamphlet describing the risks of on lead-based paint hazards to prospective buyers and renters. The Nunezes also charged the licensees with negligent misrepresentation, alleging that one of the sales associates had told them it was “a waste of time” to have the property inspected since the sellers had no plans to put money into the property.

First, the trial court and then the appeals court rejected these charges and found for the sellers and the licensees. The courts determined that because neither the sellers nor the licensees had any knowledge of lead-based paint in the house and no affirmative duty to discover the presence of the hazard, they weren’t guilty of failing to disclose that information and thus violating the act. The federal law doesn’t place any duty on homeowners or salespeople to discover the presence of lead-based paint, only to disclose it if the presence is known. The court also noted that the buyers had signed documents during the transaction acknowledging that they understood the potential risks of exposure to lead, understood they had the right to test the property for lead, and chose not to have the property inspected.

Next the courts considered the negligent misrepresentation charge against the licensees. Negligent misrepresentation occurs when individuals, in the course of their business, knowingly supply false information with the intent to deceive. These false statements must be material to the transaction and must be justifiably relied on by a third party. Finally, acting on the false statement must cause damages to the third party in order for the statement to be considered negligent misrepresentation.

Here the court found that the licensees’ statement that an inspection would be “a waste of time” didn’t provide false information about the property. The sales associates said that they’d made the statement only to indicate that the sellers wouldn’t make alterations to the property and were unwilling to lower the price or make repairs to the property. In addition, the court noted that the buyers had been given the opportunity to have the property inspected and declined to do so.

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