Knew your not cookin' with gas? You're cooked

What happens when a key stakeholder in a real estate transaction fails to disclose material information that can directly impact the outcome of said transaction?

Today, we’re diving into risk and liability , a topic inspired by a recent situation I encountered with a client. Fortunately, as we examined the facts more closely , we determined that there had not been a failure to disclose, but rather a lack of awareness regarding a particular issue. (Still, yikes , but the issue was neither severe nor insurmountable.)

That said, these situations do arise. When they do, risk can surface quickly — legal , financial , and reputational . It is critical to understand who bears responsibility, how duties are allocated among the parties, and what the potential implications may be.

We’ll begin with a practical scenario , and then walk through the corresponding responsibilities and risk profiles that must be evaluated.

Let’s say that gas service has been shut off. (This is a potentially explosive topic — pun intended — for my neighbors in East River and Seward Park, both of whom have experienced this inconvenience over the past few years.)

What if this situation is known but not disclosed?

Gas service directly affects habitability and value , so failure to disclose — by the seller, agent, or the board — opens the door to claims of misrepresentation, breach of contract, or fraud depending on who knew what and when. The risk is primarily financial (diminished value, repair costs, potential rescission pre-closing), but it can quickly escalate into litigation if the buyer can demonstrate reliance on inaccurate information.

Let’s have a quick look at seven roles and explore what their responsibilities are:

Buyer: The buyer is responsible for conducting inspections and due diligence and for making an informed decision based on available information. Ultimately assumes ownership risk after closing, except where fraud or misrepresentation is involved.

Buyer’s Agent: The buyer’s agent owes fiduciary duties of loyalty , disclosure , and reasonable care to the buyer. Must communicate known material defects and cannot misrepresent or conceal facts that affect value or safety.

Buyer’s Attorney: The buyer’s attorney is responsible for protecting the buyer through contract drafting and due diligence, including reviewing building records and negotiating representations. Must advise the buyer of identifiable risks and structure protections accordingly.

Seller: The seller must avoid fraudulent misrepresentation or active concealment of material defects. Even in an “as-is” sale, intentional nondisclosure of a known hazard can create liability .

Seller’s Agent: The Seller’s agent represents the seller but cannot knowingly conceal or misstate material conditions. Has an obligation to disclose known defects that affect value or safety.

Seller’s Attorney: The seller’s attorney drafts and negotiates the contract and advises the seller on disclosure obligations. Cannot assist in concealment and must ensure representations are legally defensible.

Board/Building Owner: The board/building owner is responsible for maintaining common systems and ensuring building-wide safety and compliance. Must act in good faith and may face liability if known system-wide hazards are ignored or concealed.

In a situation like the above, the disclosure is necessary and can impact the living experience , i.e., if you’re not cookin’ with gas, you’re not cookin’. A prospective buyer may pull out of a deal if they deem this to be a long-term inconvenience. Sellers can offer to put funds in escrow , forfeiting them if gas isn’t turned on by an agreed upon date, but that won’t appease all buyers.

What if we’re not talking about the absence of gas, but a potential leak or safety hazard?

Woah, Nelly.

If there is a known risk of a gas leak or unsafe condition and it is not disclosed, the exposure increases dramatically because the issue shifts from inconvenience to safety . Concealment of a hazardous latent defect can create liability not just for financial damages but for personal injury claims , regulatory penalties , and insurance involvement . If an accident occurs, every party with knowledge — seller, agent, board — may be scrutinized for negligence or fraud , and the financial consequences can multiply quickly.

In practice, liability often flows toward the party with the deepest pockets or the strongest insurance coverage , which frequently means insurers step in first. If the seller knew and concealed the issue, they may bear primary responsibility; if it is a building-wide system failure, the board and its insurance may be implicated; if agents failed in their disclosure duties, their Errors & Omissions (E&O) policies may come into play. Ultimately, allocation depends on knowledge , documentation , contract language , and causation.

The bottom line?

Material defects — especially those involving utilities or safety — must be disclosed by anyone who knows about them. “As-is” language does not protect against fraud or active concealment . The greater the risk to health or safety , the greater the potential legal and financial consequences for sellers, agents, and building owners, and the more likely it is that disputes escalate beyond a simple contract disagreement into serious liability exposure.