Chapter 6 - § 6.2 • SELLER'S DISCLOSURES

• Jurisdiction: Colorado

§ 6.2 • SELLER'S DISCLOSURES

Before a seller places property on the market or a buyer makes an offer, the parties should evaluate what they know about the property. Sellers should gather and review all available environmental permits, documents, and reports in their possession and evaluate the implications of the environmental circumstances on a potential sale transaction. Buyers should, at a minimum, review publicly available information and the observable physical condition and uses of the property and neighboring properties. This does not need to be an exhaustive review at this stage, but is intended to identify obvious environmental problems and issues that need further research and attention. With this information, the parties can begin to plan for dealing with expected issues before negotiations ever begin.

Each property has its own environmental circumstances that will dictate a seller's disclosure strategy. Some sellers will want to leave environmental investigations totally to the buyers. Other sellers, to learn about unknown environmental circumstances themselves or to speed up the sale process, may decide to perform their own environmental investigations prior to listing the property.

Whatever strategy is pursued, sellers must disclose to buyers all material environmental information in their possession. While Colorado generally follows the rule of caveat emptor, or buyer beware, a seller must disclose adverse environmental circumstances of which it has knowledge but which could not reasonably be discovered by a buyer.¹ While a seller must disclose factual information about the property, such as sampling data, the seller need not disclose opinions about or interpretations of the data.

Failure to address the seller's disclosure properly can lead to liability claims under the purchase contract or pursuant to common law principles. For example, common law tort claims could be made for fraud, concealment, or negligent misrepresentation.²

The Restatement (Second) of Torts also contains disclosure provisions applicable in the context of purchase and sale of land:

• § 529 Representation Misleading Because Incomplete:

A representation stating the truth so far as it goes but which the maker knows or believes to be materially misleading because of his failure to state additional or qualifying matter is a fraudulent misrepresentation.

• § 551 Liability for Nondisclosure:

(1) One who fails to disclose to another a fact that he knows may justifiably

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