Colorado Court of Appeals Opinion Involving the Sale of a Residential Home

The Colorado Court of Appeals recently handed down an interesting opinion involving the sale of a residential home, alleged fraudulent concealment during the sale by the seller, and whether knowledge about a material fact by a general contractor can be imputed to the seller. The Court’s holding should make seller’s rest easier about what information they are obligated to disclose during the sale of a home.

In Jehly v. Brown, 2014 COA 39 (Colo. App. 2014), the Defendant owned land and hired a general contractor to build a house on it. Before starting work on the home, the general contractor discovered that part of the property was located in a floodplain. The contractor did not inform the Defendant about this fact.
Later, the Plaintiffs, the Jehlys, entered into a contact to purchase the Defendant’s house. During the transaction, the Defendant did not inform the Jehlys that part of the property was located in a floodplain. The Jehlys closed on the home with no knowledge about the floodplain.

Approximately five years after closing, heavy rains caused severe flooding and damage to the basement of the house. The Jehlys sued the Defendant alleging that he fraudulently concealed information about the floodplain to induce the Jehlys to purchase the house. During trial, the Defendant denied having any personal knowledge about the floodplain and also denied that his general contractor had told him about it. The trial court found in favor of the Defendant.

On appeal, the Jehlys claimed that it was error not to impute to the Defendant the general contractor’s knowledge that part of the property was in a floodplain. The Court of Appeals disagreed and held that to prevail on a claim for fraudulent concealment, the Jehlys had to show that the seller actually knew about the floodplain. The Court also held that the general contractor’s knowledge about this material fact should not be imputed to the seller so as to attribute actual knowledge.