The disclosure form was clean - the attic was not
House flipper 3919 NEH, LLC learned the expensive way that what your contractor knows, a court can treat as what you know too.
Maryland's Appellate Court on October 5 upheld a jury verdict against the renovation-and-resale company over an attic full of animal contamination that was supposed to have been cleaned up before closing.
NEH bought a single-family property in Columbia, Maryland in August 2018, hired a contractor to gut and renovate it, and put it on the market. A company member signed the state-required disclosure form in April 2019, representing no known latent defects. The property sold "as is."
Before settlement, the buyer's home inspector found animal feces under the attic insulation and flagged it as a health risk. NEH agreed to fix the problem. Its contractor went back in, a wildlife trapping service inspected and found old raccoon droppings but "no active entry points found along the roof line," and the contractor submitted an invoice at closing stating the animal feces had been "repaired."
On move-in day, the buyer's family noticed a foul smell and sounds from above. A pest control technician found more waste. After the family returned from a vacation, a full inspection uncovered extensive contamination - mouse, raccoon, and squirrel waste - hidden under new insulation that had been laid directly over the old, contaminated layer. The attic vents had been screened with ordinary window mesh instead of proper hardware cloth. Cleanup took nearly a week. The family stayed in a hotel.
The buyer sued and a jury awarded $15,579.02 in damages, finding NEH liable for intentional misrepresentation, negligent misrepresentation, and violations of the Maryland Consumer Protection Act.
On appeal, NEH argued its disclosure obligation under Section 10-702 of Maryland's Real Property Article extended only to its own personal knowledge - and nobody at NEH had climbed into that attic. The Maryland Association of Realtors filed an amicus brief backing the company, warning the ruling would saddle sellers with inspection burdens the legislature never intended.
The court was not persuaded. It affirmed the jury's finding that the contractor's knowledge was imputed to the seller under agency law, citing the principle that "the knowledge of the agent is knowledge of the principal." It also held that the statutory disclosure form does not cap a seller's exposure - common law misrepresentation claims and the Consumer Protection Act remain available to buyers.
The court vacated the attorney's fee awards and sent them back for recalculation. The merits judgment stands.
The buyer financed this purchase with a VA loan. The VA appraiser did not detect the contamination. Neither did a termite inspector, who reported no access to the attic. For mortgage professionals working with flipped properties, the takeaway is practical: a clean appraisal and a signed disclosure form do not guarantee the property is free of hidden defects, and liability can chase the seller well past closing.
