Real Estate Fraud and Misrepresentation Claims in Tennessee

A buyer who learns after closing that the house is not what it seemed usually asks the same question: can I do anything about it? In Tennessee, the answer depends on what the seller or agent said, what they knew, what the buyer could have found with ordinary care, and how quickly the buyer acts.

Intentional misrepresentation (fraud)

The Tennessee Supreme Court set out the elements in Walker v. Sunrise Pontiac-GMC Truck, Inc. (Tenn. 2008). The buyer must show:

1. a representation of an existing or past fact;
2. that was false when made;
3. that was material;
4. made knowingly, without belief in its truth, or recklessly;
5. that the buyer reasonably relied on; and
6. that caused damage.

Reasonable reliance is often the battleground. A buyer cannot ignore what an inspection or ordinary observation would have revealed. In Lapinsky v. Cook (Tenn. Ct. App. 2016), a buyer who signed a final inspection form accepting the house in its present condition, and who saw before closing that agreed repairs had not been made, could not reasonably rely on statements that the repairs were done.

Concealment and the duty to disclose

Silence can be fraud when there is a duty to speak. Tennessee courts have long held that a seller must disclose known material facts affecting the property's value that a buyer could not discover through ordinary diligence (Simmons v. Evans, Tenn. 1947; Fayne v. Vincent, Tenn. 2009). Hidden water damage, a known foundation problem, or a concealed recurring condition can fall into that category; an obvious defect usually does not.

The Residential Property Disclosure Act

For sales of one- to four-unit residential property, the Tennessee Residential Property Disclosure Act (Tenn. Code Ann. § 66-5-201 et seq.) requires the seller either to provide a disclosure statement of known material defects or, if the buyer waives it, a disclaimer selling the property as is (§ 66-5-202). The disclosure statement is not a warranty and is not a substitute for inspections (§ 66-5-201). The owner is generally not liable for an error or omission that was not within the owner's actual knowledge, or that was based on information from public agencies or qualified experts, as long as the owner was not grossly negligent in obtaining that information from a third party and passing it on (§ 66-5-204).

The Act gives a buyer a damages remedy, but it must be brought within one year after the buyer received the disclosure statement or after closing, whichever is earlier (§ 66-5-208). The Act preserves claims for intentional or willful misrepresentation. It also lists exempt transfers, including foreclosure sales, transfers by estates and fiduciaries, and sales by an owner who has not lived in the property during the three years before the transfer (§ 66-5-209). Some matters, such as a homicide, suicide, or felony on the property, or an occupant's HIV status, are not actionable nondisclosures (§ 66-5-207).

"As is" clauses

Tennessee enforces "as is" clauses absent fraud or mistake (Odom v. Oliver, Tenn. Ct. App. 2009). In Gottesman v. Hecker (Tenn. Ct. App. 2026), the Court of Appeals held that an "as is" clause did not by itself defeat fraudulent misrepresentation, concealment, or disclosure-act claims; it is one consideration in deciding whether the buyer's reliance was reasonable.

Negligent misrepresentation and claims against agents

Tennessee recognizes negligent misrepresentation under the Restatement (Second) of Torts § 552 (Robinson v. Omer, Tenn. 1997): a person who, in the course of business, supplies false information for the guidance of others in their business transactions without reasonable care can be liable for financial losses caused by justifiable reliance on it.

Real estate licensees have statutory duties. They must exercise reasonable skill and care, disclose adverse facts of which they have actual notice or knowledge, and deal honestly and in good faith (Tenn. Code Ann. § 62-13-403). They are not obligated to discover or disclose latent defects (§ 62-13-405). In Haynes v. Lunsford (Tenn. Ct. App. 2017), claims against an agent over undisclosed mold failed because nothing showed the agent actually knew. A complaint to the Real Estate Commission is a separate track with its own deadline, generally two years from the violation or from when the complainant actually became aware of it (§ 62-13-313(e)).

The Consumer Protection Act

Tennessee's Consumer Protection Act (Tenn. Code Ann. § 47-18-101 et seq.) can allow treble damages for willful or knowing violations, and the court may award attorney's fees when the Act is violated (§ 47-18-109). The Tennessee Supreme Court applied it to sellers acting in a business capacity in Fayne v. Vincent (2009), and has said it does not reach a person making an isolated sale of their own home (Ganzevoort v. Russell, Tenn. 1997). Since 2011, a private claim must fit one of the specific practices listed in § 47-18-104(b) (§ 47-18-109(a)(1)), and how that change applies to real estate sales has not been fully settled. A Consumer Protection Act claim must be brought within one year from discovery, and no more than five years after the transaction (§ 47-18-110).

Remedies

• Rescission or damages. A defrauded buyer may seek to undo the sale or to recover damages, but must choose consistent remedies (Isaacs v. Bokor, Tenn. 1978). Damages for fraud are generally measured by the benefit of the bargain (Haynes v. Cumberland Builders, Inc., Tenn. Ct. App. 1976).
• Punitive damages require clear and convincing proof of intentional, fraudulent, malicious, or reckless conduct (Hodges v. S.C. Toof & Co., Tenn. 1992), and Tennessee generally caps them at the greater of twice compensatory damages or $500,000, with exceptions (Tenn. Code Ann. § 29-39-104).
• Attorney's fees generally are not recoverable unless a contract, a statute, or a recognized exception allows them (Cracker Barrel Old Country Store, Inc. v. Epperson, Tenn. 2009). Many purchase contracts include a fee clause.

Deadlines

Fraud and misrepresentation claims causing economic loss generally fall under the three-year statute for injury to property (Tenn. Code Ann. § 28-3-105; Vance v. Schulder, Tenn. 1977). Under the discovery rule, the clock generally starts when the buyer knew, or with reasonable diligence should have known, of the injury and that it resulted from someone's wrongful conduct (Redwing v. Catholic Bishop for the Diocese of Memphis, Tenn. 2012). Courts apply the period that matches the gravamen of each claim, and the disclosure act and Consumer Protection Act have shorter periods. Fraud must also be pleaded with particularity (Tenn. R. Civ. P. 9.02).

Deed fraud

A different kind of real estate fraud happens when someone forges or files a deed to property they do not own. Knowingly preparing or filing a transfer document when the grantor has no interest in the property is a Class E felony in Tennessee, and on conviction the court may void the document and clear the title (Tenn. Code Ann. § 39-17-116). Forgery is punished under § 39-14-114. The civil fix is usually an action to clear title. As of this writing, Tennessee has no statewide property-fraud alert program, but some counties offer free alerts when a document is recorded in an owner's name; check with your county register of deeds.

Which claims fit depends on the documents, the timeline, and who knew what. If you are a buyer, seller, or owner dealing with real estate fraud or a misrepresentation claim in Middle Tennessee, my office can review the facts and the documents with you. See also failure to disclose.

Educational disclaimer: This article provides general Tennessee educational information only and is not legal advice for any specific sale, claim, or deadline.