The Court ruled the existence of a sewer line is not a “defect” that must be disclosed when selling property.

The Court ruled the existence of a sewer line is not a “defect” that must be disclosed when selling property.

The existence of a working sewer line is not a “material defect” that must be disclosed by the seller when negotiating the sale of a property, the Supreme Court of Ohio ruled today.

A unanimous Supreme Court found that the owner of Lake Erie riverfront property did not fraudulently conceal the existence of a sewer line when he left blank on a state-required residential property disclosure form a section regarding known defects. The Court upheld the trial court decision, finding Keith Ashmus was entitled to damages when Thomas and Melissa Coughlin backed out of the purchase of Ashmus’s Bay Village home.

Writing for the Court, Justice R. Patrick DeWine stated the purpose of the state form requiring the disclosure of material defects is to alert a prospective buyer to “some sort of inadequacy or flaw” known to the seller. He cited examples of defects from prior cases, including an electrical system that failed to comply with the electrical code, and a wide crack in a basement wall that led to water seepage.

“A reasonable person might say that a sewer line had a defect if a pipe was cracked and sewage backed up. But few speakers would say that a sewer line was defective if it worked perfectly, but was in an inconvenient location,” he wrote.

The decision reversed an Eighth District Court of Appeals ruling. The case was remanded to the Cuyahoga County Common Pleas Court to restore the judgment in favor of Ashmus.

‘Dream Home’ Plan Dashed by Sewer Line Discovery
The Coughlins wanted to build their “dream home” on Lake Erie. After reviewing a promotional video of Ashmus’s property, they identified it as a desirable location to tear down the existing home and construct a new one on the lot. The couple drafted a purchase offer that provided $200,000 up front, subject to a 14-day due diligence period to allow them to “evaluate land and feasibility for new construction.” The Coughlins agreed to take the property “as is,” and waived the right to all other inspections.

Ashmus agreed to the deal and provided the Coughlins with a copy of the residential property disclosure form. The form requires sellers to disclose material matters relating to the physical condition of the property. Regarding the sewer system, Ashmus’s form noted the property was served by a public sewer.

Ashmus left blank a section of the form, which operates as a catchall and is titled “Other Known Material Defects.” The form states, “For purposes of this section, material defects would include any non-observable physical condition existing on the property that could be dangerous to anyone occupying the property or any non-observable physical condition that could inhibit a person’s use of the property.”

After the two-week due diligence period ended, but before closing the sale, the Coughlins discovered the sewer line's location on the property by reviewing Bay Village public records. The Coughlins determined the sewer line location interfered with their ability to build a new home on the spot they intended.

The couple explored the possibility of moving the sewer line, but determined it was impractical because of the cost and other issues. The Coughlins refused to close on the property.

Ashmus later sold the property to a different buyer at a lower cost than offered by the Coughlins. He sued the Coughlins for breaching their purchase contract. He sought $93,500 damages, the difference between the contract price with the Coughlins and what he received from the subsequent buyer.

Couple Claimed Seller Defrauded Them
In response to Ashmus’s lawsuit, the Coughlins denied they were to blame and argued that Ashmus’s failure to disclose the sewer line permitted them to terminate the sale. The Coughlins filed a counterclaim, alleging “misrepresentation, non-disclosure and concealment” by Ashmus. They asserted that the sewer line constituted a physical defect, and Ashmus was legally required to list it on the disclosure form. They claimed Ashmus committed fraud by failing to disclose the line’s existence.

Both parties asked the trial court for summary judgment in their favor. The court sided with Ashmus, finding the sewer easement on his property, which the Coughlins reviewed, was a public record in existence since at least 1964. The court found the Coughlins had notice of the line and also failed to produce any evidence that the sewer line adversely impacted the use or value of the property.

The Coughlins appealed to the Eighth District. In a 2-1 decision, the appeals court reversed the trial court. The Eighth District directed the trial court to further consider whether the sewer line constituted a non-observable physical condition that “could” inhibit the Coughlins’ use of the property and whether Ashmus completed the disclosure form in “good faith.”

Ashmus appealed the decision to the Supreme Court.

Supreme Court Analyzed Disclosure Requirement
Under R.C. 5302.30(D)(1), the Department of Commerce must develop a disclosure form to be completed by those transferring residential real estate. The form allows sellers to “disclose material matters relating to the physical condition of the property to be transferred.” The form includes documenting the sources of water supply and the nature of the sewer system. The form also requires reporting on “the condition of the structure of the property,” any hazardous materials like asbestos or radon gas, and “any material defects in the property that are within the actual knowledge of the transferor.”

Justice DeWine explained that R.C. 5302.30 does not create an independent cause of action to sue someone transferring property for failure to properly complete the disclosure form, but allows, in some circumstances, for buyers to rescind an agreement within three business days following receipt of the form. The opinion stated a buyer could file a lawsuit claiming common-law fraud if the seller has a legal duty to disclose a material defect but fails to disclose the defect to a buyer. The Coughlins contended that Ashmus fraudulently concealed the existence of a sewer line by leaving the catchall section blank.

The Court considered whether the sewer line constituted a “material defect,” which Ashmus would have a duty to disclose. The opinion found the Eighth District ignored the common understanding of the word “defect.”

The Court pointed to the definition of “defect” in Webster’s Third New International Dictionary, which describes a defect as “an irregularity in a surface or a structure that spoils the appearance or causes weakness or failure,” and the “want or absence of something necessary for completeness, perfection, or adequacy in form or function.”

In applying the form’s provision regarding a “defect,” the appeals court improperly focused on the Coughlins’ intended use of the property. But the form does not refer to the use of the property by “the person” buying it, the Court noted. Rather, it refers to “a person’s use of the property,” the opinion stated, and suggests an objective standard about how the property is generally used.

“In this context, the disclosure form does not require that the seller anticipate how a particular buyer might use the property; instead, the form requires that the seller describe a condition that would interfere with an ordinary buyer’s use of the property,” the opinion stated.

“[N]othing about the sewer line inhibited a buyer from purchasing Ashmus’s house and using it as a house,” the opinion stated.

The sewer line was not a material defect that Ashmus was required to disclose on the form. Because disclosure was not required, Ashmus did not commit fraud by leaving the catchall section blank, the Court concluded.

2024-0264. Ashmus v. Coughlin, Slip Opinion No. 2025-Ohio-2412.

View oral argument video of this case.

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