Do I have to disclose that my seller’s neighbor is mad at him?

QUESTION: The owner of a home I recently listed showed me a certified letter he just received from a neighbor. The neighbor is angry about water runoff from my client’s property that the neighbor claims is damaging her property, and is demanding that the seller take remedial action. The seller told me that he had some grading work done a year ago to enable a better flow of stormwater away from the foundation of his home. My questions are, one, does the neighbor have any legal basis for a claim of this nature, and two, do I have to disclose this matter to prospective buyers?

ANSWER: North Carolina courts follow a “reasonable use” rule with respect to the rights of landowners to protect themselves from surface waters coming from rain, snow and the like which is diffused and not flowing in defined channels. According to that rule, a landowner is legally permitted to make a reasonable use of his or her land, even if the use alters the flow of surface water and causes some harm to others. However, the landowner may incur liability when the interference with the flow of surface waters is unreasonable and causes substantial damage. Reasonableness is a question of fact to be determined in each case by weighing the extent and character of the harm to the affected landowner against the benefit to the landowner who has altered the flow of the surface water on his land.

Your second question is a tough one. You are required to disclose material facts about a property. In our view, the fact that your client has an angry neighbor is not itself a material fact, nor is the mere fact that the neighbor has demanded that your client take remedial action to eliminate damage that she claims is being caused by the grading work. That demand may have no legal or factual basis whatsoever. On the other hand, if there is any merit to the neighbor’s claim, it likely would be a material fact that you would be required to disclose. The problem is that you don’t know if the claim has merit and you are not in a position to determine if it does. We recommend that you ask your client to get a professional opinion as to whether the grading work was reasonably required to accomplish its objective, and whether it is causing substantial damage to the neighbor’s land. Such an opinion would provide support for a decision to disclose or not to disclose the existence of the neighbor’s demand.

Having said the foregoing, even if you come to the conclusion that disclosure is not required, you should discuss with the seller the potential benefit of disclosing the matter to an interested buyer. If you are successful in selling the property, it is very likely that the new owner will soon be made aware of the situation by their new neighbor, and they may possibly threaten to take action against you, your firm and/or the seller for failing to disclose it to them. Disclosing the existence of the matter and providing any relevant reports, etc. to an interested buyer will help avoid the issue being raised after a transaction has been completed.