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Miscommunication Leaves Buyer with a Problematic Lot

A buyer of real estate can often benefit from retaining a real estate lawyer to help with the purchase.  However, as a recent Oregon Court of Appeal case demonstrates, channels of communication between attorney and buyer must be kept open, or the buyer may be at risk.

In Atkeson v. T & K Lands, LLC, et al., the plaintiff purchased a four-acre lot that was advertised as a potential home site with a stream, bridges, gazebo, and nature trail.  The buyer agreed to purchase the lot “as-is,” but before purchasing, he retained an attorney to research its legal status.  The plaintiff went on to purchase the property, but after closing, discovered several problems, including (1) the lot was within a wetland inventory and required a wetland delineation, and as a result, was potentially unbuildable, (2) the bridges and gazebo on the lot were built without required permits, (3) some improvements violated a 50-foot setback from the stream, and (4) the nature trails were improperly located in wetland areas.  Further, the City declared the improvements on the property to be nuisances and ordered the plaintiff to remove them as well as undertake other corrective measures.  When the plaintiff learned of the extent of the problems with the lot, he sued the seller to rescind the purchase, claiming he was the victim of a mutual mistake and innocent and intentional misrepresentations by the seller.

During pretrial discovery, the seller took the deposition of the plaintiff’s attorney.  In the deposition, the attorney testified that before the sale he had known about the various problems with the lot and had told the plaintiff about those problems.  The plaintiff disputed this.  Based on the attorney’s deposition, however, the seller moved for summary judgment on the plaintiff’s claim for rescission, in part claiming that the attorney’s knowledge of the problems with the lot could be imputed to the plaintiff.  In other words, the seller claimed that since the plaintiff’s attorney knew of the problems with the lot prior to closing, the buyer is deemed to have had knowledge of those problems before closing, and, therefore, the plaintiff could not bring a claim based on mutual mistake or misrepresentation.

The Oregon Court of Appeals agreed with the seller.  It concluded that the attorney’s “knowledge about difficulties with the lot properly is imputed to plaintiff and that, on this record, that imputed knowledge defeats plaintiff’s rescission claim as a matter of law.”  It didn’t matter whether the attorney actually told the plaintiff of the problems because, as a matter of law, the plaintiff was deemed to know everything the attorney knew about the lot.  As a result, the buyer had no claim against the seller and was stuck with a very problematic lot.

  • Joseph W. West

    Joe has practiced in the areas of real estate, business and banking law in Oregon for more than 30 years. Joe’s real estate practice includes representation of owners, developers, tenants and lenders in a wide variety of matters ...

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