Attorneys’ Fees Arising from Form 17 Disclosures
There is no denying that litigation is expensive. As a result, clients often ask their attorney whether attorneys’ fees are recoverable. Often times, the answer is, “no.” The reason is because, under the American rule, attorneys’ fees are generally not recoverable unless attorneys’ fees are authorized by contract, statute, or recognized ground of equity. This article examines an avenue for attorneys’ fees in the context of litigation arising from disclosures made in connection with the sale of improved residential real estate.
When selling residential property in Washington, sellers are generally required to fill out and provide to prospective buyers a seller’s disclosure statement, often referred to as a “Form 17.” The Form 17 is governed under Chapter 64.06 of the Revised Code of Washington. For improved residential real estate, RCW 64.06.020 outlines what sellers are required to disclose. The mandatory disclosures concern things like title issues, sewer issues, environmental issues, and structural issues. Sellers have the option of answering most questions by checking a “Yes,” “No,” “Don’t Know,” or “N/A” box.
While some sellers want to rush through their Form 17 disclosures to get to their goal—executing a purchase and sale agreement to sell the property—as quickly as possible, improper disclosures in the Form 17 can lead to liability, including liability for attorneys’ fees. Indeed, multiple Washington courts in recent years have concluded that tort claims arising from Form 17 disclosures can expose a party to liability for the other party’s attorneys’ fees. Brooks v. Nord, 16 Wn. App. 2d 441, 480 P.3d 1167 (2021) (citing Brown v. Johnson, 109 Wn. App. 56, 34 P.3d 1233 (2001); Borish v. Russell, 155 Wn. App. 892, 230 P.3d 646 (2010)).
Admittedly, the way courts have arrived at the conclusion that a party can be exposed to liability for attorneys’ fees in connection with disclosures in a Form 17 is not very intuitive. Nothing in the statute governing Form 17 disclosures or the Form 17 itself provides for attorneys’ fees. Furthermore, the statute explicitly states that a seller’s disclosure statement “shall be for disclosure only and shall not be considered part of any written agreement between the buyer and seller of residential property.” RCW 64.06.020(3). Thus, the Form 17 is not considered part of any purchase and sale agreement between the seller and buyer. What is more, nearly all purchase and sale agreements contain what is known as an “integration clause,” which provides something along the lines of: “This Agreement constitutes the entire understanding between the parties and supersedes all prior or contemporaneous understandings and representations.”
Despite the lack of any explicit support for awarding attorneys’ fees in connection with litigation arising from Form 17 disclosures, cases like Brooks v. Nord have concluded implied support exists. Such implied support is based on case law standing for the proposition that in tort actions, the prevailing party is entitled to attorneys’ fees when the action is based on a contract containing an attorneys’ fee provision. Brooks, 16 Wn. App. 2d at 446. Actions are “on a contract” if (a) the action arose out of the contract, and (b) the contract is central to the dispute. Id.
Many residential purchase and sale agreements include an attorneys’ fee provision. Such a provision often provides something like: “if Buyer or Seller institutes suit against the other concerning this Agreement…the prevailing party is entitled to reasonable attorneys’ fees and expenses.” As Form 17 disclosures are provided to facilitate a transaction, and a purchase and sale agreement is central to a dispute arising from Form 17 disclosures, courts like Brooks have concluded that an attorneys’ fee provision in a purchase and sale agreement can support an award of attorneys’ fees to a party who prevails in a tort action arising from Form 17 disclosures. Brooks, 16 Wn. App. 2d at 452 (“Accordingly, we hold that where a party prevails on a tort action that is based on a [residential real estate purchase and sale agreement] containing an attorney fee provision, the prevailing party is entitled to attorney fees, even when the tort arises out of representations on a Form 17 disclosure.”).
Considering the potential for attorneys’ fees to be awarded in cases involving Form 17 disclosures, contacting a lawyer as soon as possible can be beneficial for both sellers and buyers. If you have an issue related to Form 17 disclosures, the lawyers at Beresford Booth are available to discuss details and to help you navigate your specific situation. Do not hesitate to contact us at info@beresfordlaw.com or by phone at (425) 776-4100.
