## Facts

- Judy Nelson owned a residential cabin in Mt. Charleston, Nevada.
- In 1998, a third-floor pipe burst and caused extensive water damage; Nelson made insurance-funded repairs through a contractor.
- In 2002, Nelson listed the cabin for sale and completed a Seller’s Real Property Disclosure Form under NRS chapter 113 without disclosing the 1998 water incident.
- Scott Heer inspected the cabin multiple times and obtained inspections before closing, but did not obtain a mold/environmental inspection.
- After purchase, Heer’s insurer cancelled and then renewed coverage at a higher premium due to the prior water loss, with mold excluded.
- Heer obtained mold testing showing elevated mold levels and an estimate exceeding $80,000 for remediation.
- Heer sued for breach of contract, intentional and negligent misrepresentation, and breach of the implied covenant of good faith and fair dealing, alleging statutory nondisclosure of water damage and mold.
- A jury found for Heer and the district court entered judgment; Nelson appealed.

## Issues

1. Under NRS chapter 113, did the seller have a duty to disclose the prior water damage and possible mold?
2. Did the repaired water damage and potential mold qualify as a statutory “defect” of which the seller was “aware”?
3. What effect did the absence of a statutory disclosure duty have on the buyer’s claims and the jury verdict premised on nondisclosure?

## Decision

- The Nevada Supreme Court reversed the judgment for Heer and remanded.
- The court held Nelson had no statutory duty under NRS chapter 113 to disclose the repaired 1998 water damage.
- The court also held Nelson had no statutory duty to disclose possible mold because the evidence did not show she was aware of elevated mold at the time of sale.
- Because the verdict rested on a legally unsupported theory of statutory nondisclosure, reversal and further proceedings were required.

## Legal Principles

- NRS 113.130 requires a seller to provide a disclosure form addressing defects, but the statutory duty is limited by NRS 113.140(1) to “only those defects of which the seller is aware.”
- A statutory “defect” under NRS 113.100(1) is a condition that materially and adversely affects the value or use of the residential property.
- A prior incident, if repaired and not shown to persist as a materially adverse condition at the time of sale, is not itself a statutory “defect” requiring disclosure.
- Speculative conditions or risks (such as possible mold) are not subject to mandatory disclosure absent proof the seller actually knew a qualifying current defect existed.

## Conclusion

The court construed Nevada’s residential seller disclosure statutes to require disclosure only of current, materially adverse property conditions actually known to the seller, and it held that fully repaired prior water damage and unknown mold did not trigger a statutory duty to disclose, requiring reversal of the buyer’s judgment and a remand.


Nelson v. Heer, 163 P.3d 420 (Nev. 2007)