Sewer Assessment Was Latent Defect Seller Was Obligated to Disclose

In Bockelman v. Griffin, the Eleventh District Court of Appeals held that a sewer assessment was a latent defect that was not discoverable by a buyer through ordinary due diligence, and therefore, the seller was obligated to disclose it.  The case was decided March 10, 2025.  This Court of Appeals decision upheld the Trumbull County Court of Common Pleas’ decision finding that the seller fraudulently induced purchasers to buy a residential property by making an incomplete disclosure about an impending sewer assessment.

Background Facts

In 2013, the Trumbull County Sanitary Engineer notified the seller that her residence was subject to a $27,259.61 sewer assessment. In 2016, the Sanitary Engineer sent the seller a connection notice for the sewer line in front of her property with a tap in fee of $1,890. The seller denied receipt of both notices.

The seller sold the house to the plaintiff buyers in 2017. In her Ohio Residential Property Disclosure form at Section L, the seller indicated “yes” to the question “Do you know of any violations of building or housing codes, zoning ordinances affecting the property or any nonconforming uses of the property?”

By way of explanation on the form, the seller wrote “buyer has to tie into the sewer line at the road.”  The seller also checked “no” in response to the question “do you know of any recent or proposed assessments, fees, or abatements, which could affect the property?”

The purchase agreement provided “seller has not received notice of future assessable improvements unless noted __________.”  The seller left the space blank, initialed bottom of the page, and signed the purchase agreement.

Title to the property transferred in December 2017 and in November 2018, the buyers received notice of the $27,259.61 sewer assessment. When the seller refused to reimburse the buyers, the buyers initiated a lawsuit on the basis of fraudulent inducement.

The Trial Court Proceedings

In June 2023, the seller moved to dismiss the buyers’ claim, arguing that fraud cannot be the basis of the buyers’ claim because the pending sewer assessment was a matter of public record. The seller also asserted that the buyers’ claim was barred by the “as is” terms of the purchase agreement and by the doctrine of caveat emptor. The lower court never ruled on the seller’s motion to dismiss.

The magistrate determined that, at the time of the sale, the assessment had not yet been fully levied on the property such that it would surface in a public record search as a lien against the property. The magistrate concluded the seller had a duty to disclose the assessment to the buyers but only partially did so when there was a duty to speak. Accordingly, the failure to disclose was made with knowledge of its falsity and with the intent of misleading the buyers into relying on it. The seller again appealed to the 11^th District Court of Appeals asserting three assignments of error.

The Appellate Court Decision

The seller asserted that the trial court erred by adopting the magistrate’s conclusion that failure to disclose the pending sewer assessment on the property disclosure form was fraudulent. Because the buyer failed to timely file the transcript, the appellate court’s review was limited to whether the trial court’s application of the law to its factual findings constituted an abuse of discretion.

The Court of Appeals stated that in order to prove fraud in the inducement, the plaintiff buyers must prove that the defendant seller made a knowing, material misrepresentation with the intent of inducing the plaintiff’s reliance, and that the plaintiff relied upon that misrepresentation.

R.C. 5302.30 governs a seller’s duty to disclose the pending sewer assessment and requires every person who intends to transfer any residential real property to complete all applicable items in a property disclosure form and disclose “material matters relating to the physical condition of the property to be transferred, including but not limited to …the nature of the sewer system serving the property …and any materials defects in the property that are within the actual knowledge of the transferor.”  Fraud exists when a seller intentionally fails to disclose a material fact on the disclosure form with the intention of misleading the buyer, and the buyer relies on the disclosure form, the seller is liable for any resulting injury.

The Eleventh District Court of Appeals cited Layman v. Binns, 35 Ohio St.3d 176 (1988), which held that caveat emptor only applies when:

1. the defect is open and observable to observation or is discoverable on reasonable inspection;
2. the buyer had unimpeded opportunity to examine the property; and
3. the seller has not engaged in fraud.

The magistrate found that the pending sewer assessment was a latent defect because, at the time of the sale, the assessment had not yet been fully levied on the property such that it would surface on a public records search in the title report as a lien against the property. The magistrate continued:

Accordingly, the Eleventh District Court of Appeals determined that the magistrate’s findings supported the legal conclusions that:

1. the buyers’ reliance on the property disclosure form was justifiable and
2. that the doctrine of caveat emptor does not preclude the buyers’ recovery because the pending sewer assessment was not openly observable or readily discoverable upon a reasonable inspection.

Conclusion

This decision reaffirms long-standing Ohio law that sellers of residential real property should disclose all material facts regarding the physical condition of the property that a buyer would not discover upon a reasonable inspection. Here, the seller should have disclosed both the smaller sewer tie-in fee and the larger sewer assessment.

If you have any questions about this ruling, please contact Cynthia A. Lammert, Mark L. Rodio, or any member of the Frantz Ward Litigation practice group.