Helen is selling her Frankfort home and completes the Kentucky Seller Disclosure form, checking 'No' for any known water intrusion issues. After closing, the buyer discovers significant basement flooding that occurs every spring. Investigation reveals that Helen experienced this flooding three times before listing the property but genuinely believed it was caused by a neighbor's irrigation system that had since been removed. Which of the following best describes the legal outcome under KRS 324.360?

Correct Answer

C) Helen may have liability if it is determined that her belief was not reasonable given the repeated flooding she experienced, but she is not automatically liable.

KRS 324.360 requires disclosure of known material defects. The key issue is whether Helen's belief that the flooding was resolved was reasonable. Having experienced flooding three times, a court or KREC could find that a reasonable seller would have disclosed the history of water intrusion even if she believed the cause had been eliminated. Her liability depends on whether her non-disclosure was in good faith based on a reasonable belief, not merely a subjective one. She is not automatically liable, but the facts create significant exposure.