Buyer Wins $230,000 Because Sellers Didn't Disclose Property's Wetlands Violations

Thursday, August 30, 2018 7:55 am
August 2018 - Volume 46 Number 8

A government regulation that requires landowners to obtain permits before filling wetlands for agricultural use can be an "encumbrance" that must be disclosed at sale if a seller knows that the regulation affects the seller’s land.

Facts: Plaintiff Favero Farms, LC bought 20 acres of Utah farmland from H. Dan and Tami Baugh. The parties’ sales contract included a warranty against encumbrances and a warranty to deliver the property "in generally accepted agricultural condition." The Baughs did not disclose any encumbrances on the property, and Favero Farms did not object to the Baughs’ nondisclosure. Per the terms of the contract, the covenant against encumbrances did not survive the closing because Favero Farms did not object. However, under the contract, the warranty that the Baughs deliver the property in agricultural condition did survive the closing.

Favero Farms soon learned that the property was not in generally accepted agricultural condition. It contained wetlands that could not be farmed without first obtaining a wetlands permit from the Army Corps of Engineers (Corps). The fill process itself would be prohibitively expensive. Moreover, the Baughs had already run afoul of the Corps. Back when the Baughs bought the property,[..]