Litigating Disclosures in Real Estate Sales Transactions

Seller disclosures are a critical component of real estate sales transactions and are particularly important to residential real property purchase and sale transactions. Seller disclosures are required by law in California and are an integral and essential component of fairness in the transaction in which the buyer is unaware of many of the conditions of the property and simply doesn’t have access to the information and is therefore relaying on the good faith and honesty of the seller to disclose the relevant information so that the buyer can make an informed decision concerning the value and desirability of the property, and also that the price will accurately reflect the condition of the property and that both sides to the transaction will have full and fair information upon which to deal.

A seller’s failure to disclose information the seller knows and is aware of at the time of the sale, and that the buyer does not know and has no access to, creates a unfair disparity in the transaction, and is in fact fraudulent. Concealing from the buyer known material information that affects the value or desirability of the property, typically accomplished  by the seller’ silence, while providing extensive information concerning virtually every element of the property in the information the seller certifies as true and correct, which the buyer relies on as complete, when it is not, is not simply a failure to comply with the seller’s statutory disclosure requirements, set forth in California Civil Code §§ 1102.1 through 1102.19, and a violation of the separate and independent common law duty of disclosure, but this concealment amounts to fraud. Assilzadeh v. California Federal Bank (2000) 82 Cal.App.4th 399, 409-410.

Statutory and Common Law Disclosure Requirements  

The statutory requirements are specifically spelled out in the Civil Code sections noted above, and are covered in the Transfer Disclosure Statement (a statutory requirement) and the Seller Property Questionnaire, an additional seller disclosure document that is provided to the buyer during escrow, a document that specifically states that it is not s substitute for the Transfer Disclosure Statement, but is used by the seller to provide additional information when a ore TDS is completed or not required. These two documents together provide comprehensive and detailed questions, issues and responses concerning essentially every component of the property, including the building, the land, permits and building codes, CC&R’s, easements or restrictions and a list of issues such as lawsuits, defects in various components. Any “Yes” answer requires an explanation. This disclosure is supplemented by the Seller Property Questionnaire, which specifically states that the purpose of the disclosure is to tell the buyer about known material or significant items affecting the value or desirability of the property so that there are not misunderstandings about the condition of the property. This statement repeats the common law disclosure requirement, which imposes on sellers of real property the affirmative duty to disclose. See, Shapiro vs. Sutherland (1998) 64 Cal.App. 4th 1534, 1544 and Lingsch v. Savage (1963) 213 Cal.App.2d 729,736, regarding the statutory and common law duties.

The Seller Property Questionnaire, similar to the TDS form, covers a wide range of topics and conditions, including zoning, nuisance, repairs and alterations, structural systems and appliances, water-related and mold issues, boundaries, title, ownership and liens, and is signed and certified by the seller as true and correct.

Notably, the statutory requirements do not just call for narrow and technical responses to specific questions, but specifically require good faith and honesty in all responses. Civil Code § 1102.7. In other words, if the Seller knows and is aware of anything that might affect the value or desirability of the property, from the perspective of the buyer, they have an affirmative duty to disclose and explain that item. They cannot remain silent and wait for the buyer to ask the right question. The buyer’s duty to investigate is  limited, and while there is typically a buyer’s inspection advisory, the buyer’s “investigation” of the property is limited to a visual inspection by themselves and their broker-agent, who are usually not experts, a home inspection by a professional home inspector, which is really a visual inspection and a check of the operation of various appliances and systems, and an investigation of information provided by the seller. In other words, the buyer relies on the information provided by the seller, who knows the property better than anyone, and the onus and the duty to provide information is on the seller.

A seller’s failure to properly, accurately and completely disclose all known material facts relating to the value or desirability of the property, and specifically, any known defects or conditions that might affect its value or desirability, from the perspective of the buyer, gives rise to a claim for damages by the buyer, including the remedy of rescission, to rescind the sale.

Litigation based on seller non-disclosure seeks to restore the value lost to the buyer as a result of the failure to provide complete and accurate information that was known the seller at the time of the sale. As stated above, a failure to disclose is fraud, essentially misleading the buyer by concealing known information that would have affected the buyer’s decision to complete the sale or pay a certain price.  

The Solution to Seller Non-Disclosure

 

Timothy Norton of Norton & Associates has been successfully pursuing seller non-disclosure and fraud claims for over 30 years, with an emphasis on the statutory and common law disclosure requirements that are designed to protect buyers and restoring property investment value that is lost through seller non-disclosure and fraud. Residential Real Property Purchase Agreements typically provide additional protections to the buyer in such actions including the recovery of attorney fees to the prevailing party. A consultation and analysis will enable us to determine the loss of value, the cost to repair or remedy the problem, to scale and scope of the damages and the financial viability of the seller or seller’s agents to bear the liability. Call (310) 706-4134 today for a remote and safe consultation.

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