Agents’ duty to discover and disclose facts about highways that are proposed but not yet planned?

QUESTION:    I live in Raleigh and represent both buyers and sellers. Over the past few years, there has been some publicity surrounding what is known as the “Southeast Extension”. This proposed road construction project would extend the Triangle Expressway and complete what is known as the “540 Outer Loop” around the greater Raleigh area. At this point, the route for the Southeast Extension has not been selected. It is anticipated that one of several proposed routes will be selected by the NCDOT in the fall of 2015. What are my obligations as either a listing agent or a selling agent with regard to disclosing the potential impact of a roadway that is proposed but may never be built?

ANSWER:  North Carolina’s license law obligates licensed agents to disclose material facts about a property. In some cases, however, it is not easy to determine whether a fact is sufficiently “material” to require disclosure. The North Carolina Real Estate Commission has identified three categories of facts that must be disclosed if the agent has knowledge of those facts OR if the agent should reasonably be aware of those facts. One category includes facts that “relate directly to the property.” Typically, that category refers to external factors that affect the use, desirability or value of a property.

One example of such an external factor that is identified n the Real Estate Commission’s Real Estate Manual is a plan to widen an adjacent street. An article published in the Real Estate Bulletin in May 2014 cited a plan by the NCDOT to construct or widen a roadway that has been publicized on the NCDOT’s website, in local newspapers or on local TV as an example of “common knowledge” that all agents are expected to know about and disclose. In 2013, one agent was disciplined by the Real Estate Commission for failing to discover and disclose that the NCDOT planned to build a freeway adjacent to the property she had listed for sale. But what if a road construction project is not yet planned but is merely a possibility that is still under consideration?

To answer this question, agents must ask themselves whether a proposed road project sufficiently affects the use, desirability or value of the property in question. A reasonableness standard should be applied. Ask yourself whether the publicly available information concerning the project would affect a reasonable prospective buyer’s decision to buy the property. In the situation you have described, the proximity of the proposed roadway to the subject property will be a crucial factor. If the proposed road would be close enough to the property that road noise will likely be heard at the property, disclosure is almost certainly required. Similarly, if the proposed roadway will affect the volume of traffic adjacent or close to the property, the status of the proposed project should be disclosed. Increased noise and traffic are both matters that almost certainly would affect the normal use and enjoyment, and therefore the value of, the property.

As with all disclosure issues, when in doubt, always disclose. Once a proposed road construction project is disclosed, it is up to the buyer to conduct whatever investigation he or she feels is appropriate. Paragraph 4(b)(vi) of the Offer to Purchase and Contract (Standard Form 2-T) specifically includes “planned or proposed road construction” in the list of investigations that should be conducted during the Due Diligence Period.

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