HILO — Can a buyer of your property sue you because the buyers say they were unaware the area is home to drug dealers, prostitutes and coqui frogs? HILO — Can a buyer of your property sue you because the
HILO — Can a buyer of your property sue you because the buyers say they were unaware the area is home to drug dealers, prostitutes and coqui frogs?
No, says the state appeals court, in upholding a verdict against a Hilo real estate company.
The case before the Intermediate Court of Appeals stemmed from the potential sale of a vacant 4.4-acre parcel at 245 Wainaku Street, in 2005, for $1.9 million.
James Clay and Sandy Singleton submitted an offer for the property because they liked its description as being close to “the views and sounds of waterfalls and Pukihae Stream.” They also made a $25,000 deposit that would be forfeited if the deal fell through.
In June of that year the two buyers then formed a new corporation, Brinkwood Land Equities, to execute the purchase, but they canceled escrow in August. Despite this, Singleton made plans with Kelly Moran, real estate broker for Hilo Brokers Ltd., on Sept. 9, 2005, to sign a new deal and make a deposit, but three days before that Singleton made a visit to the property at night.
Testifying later in a deposition, Singleton said she visited the area and realized how loud the coqui frogs were. She also testified that she had learned the area near the property was “populated by drug dealers and hookers.”
In a complaint filed in November 2007, Brinkwood claimed Moran and Hilo Brokers had misrepresented the property when, instead of being in an area “where one could hear the flow of waterfalls and a stream … all one could hear is the sound of dying and tortured animals (which is the sound of the frogs occupying the area) and [the property] was in a neighborhood where drug dealers and prostitutes frequented.”
Circuit Judge Glenn Hara dismissed the complaint in January 2010, and Brinkwood appealed the decision.
“The question before us is whether (Hilo Brokers) had a duty to inspect and disclose information about off-site social conditions that could affect the value of the property,” the appeals court said in its unanimous opinion. “Brinkwood cites to no Hawaii statute or case to support its theory that a seller or broker has a duty to inspect or disclose information about off-site social conditions.”
The court cited a New Jersey Supreme Court ruling that found sellers and brokers do not have a duty to disclose “transient social conditions” — that is, the presence of undesirable characters — even if they do affect property values.
As for the coqui frog complaint, the defendant produced a one-page disclosure form, signed by Brinkwood, that acknowledged they were aware of the presence of the coqui frogs. The disclosure recommended buyers to visit the property in the evening “to determine the level of frog infestation and frog chirping and whether it is acceptable to the buyer.”
“They sued for misinformation on coqui frogs; yet they signed,” Moran said.
After Singleton and Clay canceled escrow, the property was sold to Wailuku Village LLC, which laid the groundwork for condominiums but did not do any physical work on the land. At the property owners’ request, Moran has re-listed the property, complete with plans for a 105-unit condominium, at $1.8 million.
The new listing states: “The property is on a hill bordering Pukihae Stream. Great site for creating a residential community that is walking distance to Hilo Bay and downtown business district. Located on Wainaku Street in an area of kamaaina homes and apartment buildings.”
Moran said Brinkwood’s principals, whom he believed were from Honolulu, were more interested in settling out of court, but Moran refused.
Moran also disputed their characterization of the Puueo community, calling it “their opinion.”
“It’s very subjective. I’ve driven through there and I’ve never witnessed any … nefarious activity,” he said.
