He is known to many as "The Greatest" and was in the "Fight of the Century." However, boxing great Muhammad Ali, who was famously involved in a storied legal battle several decades ago, is again fighting in a court of law. Whether he is now engaging in his biggest fight of recent memory remains to be answered, yet the best result may have been for him not to be in a position in which he felt he needed to jump into the ring at all.
Ali (along with his wife and LAMA LLC) recently filed a lawsuit in Louisville, Kentucky arising out of alleged defects which were purportedly not disclosed during the purchase process. He asserts claims for breach of contract, negligent misrepresentation, fraud, fraud by omission, unjust enrichment and statutory violations against the sellers (who are claimed to have lived and participated in the construction of the home).
Ali and other athletic icons who achieved celebrity status worked tirelessly in achieving their goal of success in the sporting world. However, despite their achievements, they are not immune to having concerns regarding real estate transactions. Indeed, regardless of the price tag for their luxury palace, sports figures expect that their residence will be free of defects and that he or she will not have to experience purported problems such as roof leaks, chimney leaks, water intrusion, poor insulation, improper ventilation, mold, problems with the concrete tiles, issues with tile work or retaining walls or any structural issues.
Frequently, defects in a home cannot be discovered prior to purchase (and sometimes not even until a remodel commences or until the house weathers a heavy storm). If defects later materialize, a legal fight often times will last several "rounds" and will be costly and exhausting. Thus, it is beneficial to know what can be done to mitigate the risk of becoming entangled in a legal heavy weight fight and what to expect if it happens.
To protect purchasers, most states require that sellers disclose any fact that would materially affect the value and desirability of the property which includes the working condition of numerous systems and components, among other things. (E.g., 201 Kentucky Admin. Regulations 11.350; Kentucky Rev. Stat. Ann. Section 324.360; and, California Civil Code Section 1102.6). Unfortunately, when material defects are not disclosed, or are not discoverable by a reasonable visual inspection, a buyer can find himself or herself challenged with an extensive list of repair costs.
Ali alleges that the sellers failed to comply with their disclosure obligations by failing to disclose numerous purported defects and even purportedly failing to disclose "encumbrances on the property, including, but not limited to, the failure to advise plaintiffs that a permanent structure on the property was actually placed on top of a utility easement that could result in said structure being torn down." He claims that in allegedly doing so, the sellers damaged him and that the sellers were unjustly enriched. While the sellers have not yet responded to the lawsuit, and there are always two sides to every story, this case is an interesting backdrop for discussing the sale and purchase of high end homes.
In his complaint, Ali also asserts that the sellers failed to disclose numerous issues. Hopefully Ali still has the endurance to float like a butterfly and sting like a bee as real estate litigation can be a costly and lengthy endeavor.
In situations such as this, typically the parties will attempt to resolve their dispute informally through mediation, and if that does not happen and the dispute remains unresolved, then the party who claims they were wronged will commence arbitration or file suit. Regardless of path taken, the parties can expect to incur significant litigation costs before a resolution is reached, as knock-out punches are uncommon. Legal fees and costs can easily exceed six figures. For example, often times an expert or team of experts may be required to prove that certain components or systems were not constructed within the standard of care, that certain repairs are not needed, the estimation of such costs , and to identify other possible issues. In such instances, the sports figure will need to retain a lawyer or team of lawyers who are not only capable of navigating real estate disclosure law but who are also experienced in handling construction defect litigation and know insurance coverage matters (since insurance coverage may provide the plaintiff with assurances of recovery if he or she wins).
There are few things that a high-end buyer may wish to consider to protect them from having to litigate. A buyer should always inquire about any repairs or renovations, and attempt to obtain copies of the initial repair recommendations and documents regarding actual repairs made. This may show whether the seller knew about any deficiencies but opted for largely cosmetic repairs. For example, if the seller represents that the roof is new, the buyer should ask for the warranty.
Also the buyer should have someone travel to the building department to see if the structures were properly permitted. A good person to do this would be a general contractor or design professional. Performing such a review is not cost prohibitive and after a few hours time, the buyer would have a good idea as to how the property looks on paper. The buyer should also retain an architect, general contractor or engineer to perform a thorough investigation of the property – as opposed to a simple visual walk through. Often times these specialists identify issues, that an inspector may not.
While these extra steps may appear time consuming and expensive, the benefit of this course of action weighs heavily in favor of doing it. If nothing is found, the buyer will have a piece of mind. If the experts find something, it could ultimately end up getting the buyer a significantly lower price on the residence or allow them to make the decision not to buy the property. In the end, avoiding a lengthy and costly lawsuit may turn out to make the potential buyer the ultimate champion.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
