Episode 25: Unruly Neighbors – Phoenix v. U.S. Homes Corp

In Season 2, Episode 3, Cassie, Ali, and Danielle discuss the real estate case of Phoenix v. U.S. Homes Corp.

This real estate case is CRAZY!

The District Court dismisses Cyndee Phoenix’s complaint that stated that there was misrepresentation when she purchased her home regarding an unruly neighbor. Hear what the District Court had to say about all of this and then our opinion!

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ABOUT US -🎙 Agents Unfiltered SEASON 2 is about a deep dive into some wild real estate cases and give our take! Get ready for some relatable and relevant information about “The Do’s, the Don’ts & the What The Fuck’s of Real Estate.”

PODCAST TRANSCRIPT:

Hey everyone, welcome to agents unfiltered, where we talk about the do’s, the don’ts, and the what the fuck’s of real estate. We are Ali, Danielle, and Cassie. Join the three of us every week as we deep dive into some wild real estate cases and give our take. We are not attorneys and want to make it clear that this podcast or any linked materials should not be construed as legal advice. Nor is this information a substitute for professional expertise. We are not lawyers, doctors, financial advisors, and mortgage lenders, but we are your new BFFs

Ali: Okay, so today my court case is Phoenix v. U.S. Homes Corp. Cydnee Phoenix is the buyer against Lennar Homes, the developer. Basically what happened is a federal appellate court considered whether a developer could be liable for failing to disclose to a buyer the presence of an unruly neighbor. Have you heard this one?

Cassie: No, I’m curious what it’s defined as unruly.

Danielle: I feel like that’s very broad.

Ali: So basically, while visiting the Lennar Homes development, Cydnee, the buyer, was approached by the neighbor who warned her about the developer, basically trying to steer her away from the neighborhood. Cydnee asked the real estate professional that she was there with if she should be concerned about the neighbor, to which the realtor implied the neighbor was just unhappy because of his warranty services. The buyer entered into an agreement to purchase the developer’s property. Before closing, the developer sent a letter to the neighbor requesting he no longer park his cars in the driveway or in front of the property that the buyer was purchasing, and to also not interfere with the developer’s operations, or with his new clients.

After that happened, the harassment got worse. The buyer claims that the letter caused the neighbor to retaliate through a pattern of harassing comments, and behavior, to the point where eventually the buyer obtained a restraining order against the neighbor because it got so bad.

Cassie: Wow.

Ali: Yeah. It was pretty intense. The buyer brought a lawsuit against the developer claiming they misrepresented the neighbor’s destructive behavior and alleged negligent misrepresentation, consumer fraud allegations, and negligent infliction of emotional distress. These claims were based on the fact that the developer’s broker had not fully informed her about the neighbor when she asked about him specifically.

Cassie: That’s so tough though because they may not even know how drastic a person can be.

Danielle: Right. You could just think someone’s a little mosquito and then they turn into this awful big thing and it’s like, how do you know?

Ali: The trial court dismissed a lawsuit, but then the buyer appealed. The United State Court of Appeals for the Third Circuit affirmed the ruling of the trial court, both the misrepresentation claims and the consumer fraud claims required to show that the developer or its agent had misrepresented material facts. The developer’s and real estate professionals’ comments were implying that the neighbor was not a problem and were statements of opinion, not facts, therefore the buyer had failed to allege any factual misrepresentations, and so the buyer’s claims failed.

Cassie: Okay. That makes sense, of course, because that’s not a material fact of the house either. Do you know what I mean? Like yes, it’s not a fact, it’s an opinion, but also it has to be something that’s an issue with the home. Just like you don’t have to disclose if there was a death on the property. Some buyers might be really upset about that, but that’s not a material fact.

Ali: And it’s not like there’s a place on the seller’s disclosure that says, are the neighbors obnoxious? Unruly? And are they going to harass you? Do you know what I mean?

Danielle: Working in new home construction for a long time, literally I was listening to this and I was like, this could have been something that happened in one of our developments.

Cassie: We have this one out in the valley and everything was fine, and then we had this one neighbor who was like on a corner lot. They parked their RV on the side of the lot, right? It’s against the CC&Rs from what I remember, It was a long time ago. It became this whole ordeal. They were like, well, we fenced it. Well, the fence didn’t count because it wasn’t tall enough. I forgot all the CC&R stuff, but it became this huge deal. The story is that anybody who would walk through the neighborhood would just bitch about the builder/developer to everyone. It became such a huge issue because they were drinking and just bad-mouthing people.

It was just to the point where we’re like, they weren’t harassing us, fully, the owners still liked us enough, but it wasn’t like our job to say, oh, there’s this one neighbor who’s off their rocker, but they were just bad-mouthing everything because they were upset. They had their realtor. Thankfully they were not ones that we represented on the buyer’s side, because I think that would’ve been really uncomfortable and really difficult, but still, it was a mess. I don’t know if the builder took legal action or not. I feel like they were thinking about it and sent a cease-and-desist letter.

Cassie: What does that mean? If they didn’t stop, what would have happened? They would have been sued or taken to court?

Ali: Yes, they would have been sued or taken to court if they did not stop harassing, or doing whatever activity.

Daniele: Was it the neighbor, or it was the developer that did that?

Cassie: In this situation, it was the people who bought one of the developers’ homes. Our model home was right around the corner from this lot, and the builder/developer ended up sending a cease and desist letter saying if they did not stop this behavior, then we will take legal action.

Ali: Also how immature, what kind of person does that? I could be so salty, but you’re not going to find me cruising down the sidewalk with my wine glass talking shit. Does that sound like a blast though? A little bit. But would I do it? No.

Cassie: Yes, I was embarrassed for these people, I am not going to lie. They were like 50-something and it was kind of a mess.

Ali: This happened in New Jersey. The final thoughts on this were the court examined whether the developer had a duty to disclose offsite social conditions such as an unruly neighbor because in New Jersey, a seller has to disclose off-site conditions that are material to the transaction, but a seller does not have a duty to investigate or disclose social conditions because that’s an arguable fact.

Cassie: See, so that’s interesting because like in Washington, we don’t have to disclose offsite material.

Danielle: Would that be like if you were next to a dump or there used to be a meth lab next door?

Cassie: But only if you know. Do you know what I mean? if you’re just like, suspect that that’s what it is. I feel like you can only disclose if it was busted and it was in the newspaper and there was met. I’d be curious to know in New Jersey, how far off-site?

Danielle: Right.

Cassie: Is it just next door? Is it three houses down? Is it a block down? Like, you know what I’m saying? I feel like they have to be super clear on the parameters of that for it to work.

Ali: Also, some people know all their neighbors and some people just know one. Not everyone’s the same.

Cassie: Yeah. That’s, that’s asking a lot. I’m really curious. I want to dive further into it and see what that looks like, because to me, I like in our state that the sellers just have to disclose the house because I think it’s very clear cut off like, this is your duty and I’d be curious to see what New Jersey’s is like.

Danielle: Also, are they allowed to say, ‘I don’t know’? As long as there’s an option to be like, I’m not sure, I feel like that is fair.

Cassie: What if you look in a condo complex? How are you gonna know what any of your neighbors are like?

Ali: I just saw, actually on TikTok, there was like a realtor in Jersey City and he had a condo listed. When we lived in Jersey, we didn’t know any of our neighbors at all. So I’m like, man, if you live in a condo and you’re in the middle of an industrial area, how much do you know if you have to disclose?

Cassie: I feel like that’s an interesting ruling for them to have.

Danielle: At least for us here, I feel like there’s nothing we can do in regards to neighbors, which they ruled that in Jersey too. You can’t figure out how neighbors are unless the buyers drive the neighborhood during different times of the day just to get a feel for it.

Ali: Also, I think that all the time that someone has called someone an asshole, and then I get along with them great. I’m like, do I just like assholes? Or do I just know how to deal with certain people differently? People respond to people differently. There is not one situation for a relationship.

Cassie: It’s so true. As the buyer, the burden falls on you to determine, are these neighbors going to be more than you can handle. You can’t expect your realtor to be able to tell you this neighbor is gonna be a problem for you.

Danielle: That’s the one thing I always tell my buyers is the one thing you can never choose is your neighbors, because even if you are like, oh, the neighborhood feels great now and I’ve driven by it and met some of the neighbors, who’s to say they’re not moving next month? Like you literally have no idea. It’s unfortunate the only way to solve that is to move onto the property where you have more space.

Cassie: Another thing I think about is her suing them like I totally get it. Money makes things a little bit easier and it makes you feel validated, but are you gonna move out of that house? How are you gonna sell your home if you feel it’s necessary to disclose that social situation next door? You’re still freaking stuck.

Danielle: Oh, a hundred. That’s very true. Unless she was trying to sue them to have them take the house back. I can see that if she’s saying it wasn’t disclosed and you should have disclosed it, so now we need to rescind this whole purchase. I can see that’s the only way out. But then I also think, knowing how much attorneys cost, how much did that cost that lady to take that to court?

Ali: Oh my gosh. I know. I wish I had an address here to see what kind of neighborhood this happened in. It must have been new because It was a new development.

Cassie: This was in 2016, I feel like that was an appropriate letter for a developer to send, saying like, please don’t park in the driveway anymore. I have buyers for this home. That’s a very standard measure.

Ali: Also, the fact of the matter is you probably never should have been parking in another driveway in the first place. So that was pretty polite, in my opinion. That was pretty polite.

Danielle: It’s interesting the whole material fact, but I think that’s something that comes up so often and it’s like what’s material versus what’s not material? Also, what is the material for the property, we’re not talking about outside of the property in Washington state. A material fact is like a physical fact, like, something that can’t be argued.

Cassie: Sometimes there’s weird stuff. I have one client who had buried a building on their property.

Ali: Oh yeah, I remember that. Like on purpose, like it was like a little bomb shelter?

Cassie: No, they had a building on the property that they wanted to tear down. They ended up talking to the city and deciding to bulldoze it and bury it, as opposed to dirt and concrete. They got permits, they did the whole thing. When we were working with them and looking through all the paperwork, they were like, wait, we didn’t tell you this. Is this gonna be an issue? So I called you and was like is burying a building material fact?

Ali: I mean, does it propose any sort of harm?

Danielle: Not necessarily, but I think it’s something worth disclosing. It doesn’t hurt to disclose. It doesn’t hurt to over-disclose. Better to over-disclose, as long as you know. Sometimes you get people that over-disclose things they don’t actually know, but they think. That is where you can get yourself in trouble. Like it has to be stuff that, you know like they know they buried a building under here. They got approval from the city.

Cassie: When we were initially talking and going through the seller’s closure, it didn’t occur to them that that might be something and they ended up calling me later and saying, oh my gosh, we forgot to tell you this. What do we need to do? Which I so appreciated because they were very forthcoming.

Danielle: But disclosing that you have an annoying neighbor, which is another reason why I don’t love having sellers in homes or tenants in homes when I’m showing, especially tenants, because they will disclose things that could be a hundred percent accurate or could not be, depending on their motivation of wanting to stay at home or not.

Ali: I know. I showed a house last night that had the seller still in it cause they were packing up everything and she came from room to room with us and she was super sweet, but I think people just get so nervous about like not wanting to be judged on their home or hoping someone likes it so much that they kind of tag along and try to explain things to justify how something looks or is or just whatever. In that, you can just accidentally say things. She didn’t, but I could see that happening.

Cassie: That’s why I tell my sellers during our listing appointment like, you’re hiring me for a reason. If you have people that come and want to chat with you about your home, just say, you know what, my realtor would love to discuss that with you, because that’s exactly what happens. It’s usually meant well like they’re not trying to mislead somebody or disclose something that’s not accurate, but it happens because they’re nervous or because they’re really wanting to sell or whatever. Sometimes it’s not even what the seller says, but it’s how the buyer takes it. I always tell people, just call me, that’s what I’m here for. Then you don’t have to worry about that liability because you’ve done your seller disclosure properly and I can make sure things are done and said properly and there’s no misconstrued conversation.

Danielle: It’s the worst, because think about how many times, even in text, someone will say, well, you didn’t say that, and then you go back and you’re like, actually, I did, so when it’s just verbal it’s even worse.

Cassie: I’m really glad that we do not have to disclose neighborhood or outside-the-home material facts. How was it worded, Ali?

Ali: For New Jersey, it was worded ‘offsite social conditions’. That is what they are saying they did not have to do, but they are saying in New Jersey, a seller has a duty to disclose off-site conditions that are material, not offsite social conditions.

Danielle: Jersey, what the heck?

Ali: Yeah. Geez. The law is from ‘95.

Cassie: Aw, I was 1 year old!

Danielle: Oh my gosh. Get out here.

Cassie: That was a good year.

Danielle: Do you remember that year?

Cassie: No, I think that’s why it was so good.

Ali: I was 11, that was my last year living on the East Coast before moving here.

Cassie: I just think that’s probably the first year I tried cake, so it had to have been a good year.

Ali: Okay, so I do think this law seems to be more narrow than what it sounds like in that story. It was enacted in 1995, and the law requires a list of certain offsite conditions in the municipality, which may affect the value of a newly constructed residential real estate. Only newly constructed, which is why they can try to take a developer to court, but it’s only new construction.

Cassie: That’s interesting and a lot less stressful.

Ali: This includes Superfund sites and other known contaminated sites. That makes a little more sense.

Cassie: We don’t have that here at all.

Ali: Just the land, but very interesting. I feel like this is our second case of seller disclosure issues. I feel like this is where most of the court cases come from.

Cassie: I am relieved that the court dismissed it because if we had to warn our clients about unruly neighbors, could you imagine? What one person defines as unruly like you said Ali, like another person’s gonna be like, oh, I think you’re hilarious.

Ali: That sort of thing just adds in a whole nother level of your realtor has to be your effing therapist and I’m not here for it. I’m happy to help with how I can, but I don’t mean any extra element where I have to coddle and help someone learn how to be an adult.

Cassie: If you go down that road and you think as we could potentially be sued for not helping our buyers figure it out, like if there was a law, could you imagine like we talked to go to each house and to interview the neighbors and then give our personal opinion? That sounds terrible.

Ali: No, absolutely not. Literally no way, but it’s not material, so it wouldn’t apply.

Danielle: It’s not even real when it’s stressing me out.

Cassie: We’re all sweating.

Danielle: If that ever becomes a real law, we’re gonna be in trouble. I don’t think it’s headed that way.

Ali: I’m not an effing lawyer, Danielle. Back to our disclaimer. I know how to say fiduciary. Yay. We practiced today. We practiced this morning.

Cassie: Okay, court dismissed. Make sure to follow us on Instagram and TikTok. We are at Agents Unfiltered. Have a lovely day. Bye.