Seller of Property Must Disclose
Anything That Affects Value
or Desirability of Property
09/18/05
Dear
Mr.
Duman:
We enjoy
reading your articles. You have been emphasizing a lot about the
necessity for
disclosure, work with permit, and inspection.
This is a
good case of all. We purchased an expensive house with a beautiful yard
that
had a built in BBQ and gas-fire-pit.
After the closing, we tried to re-establish utility services;
but, the
gas company brought to our attention a gas leak. We later discovered
that the
gas line to the yard is under ground, and has a leak and is not done
properly
per code. Any gas-line requires a
permit, so the proper inspection can be done.
These
issues
were not disclosed before the closing.
What is our recourse?
B.
M., Livermore
Dear
B. M.:
Generally
speaking, your primary recourse against a seller of real property, who
has
failed to comply with one or more required disclosure requirements, is
to file
a civil lawsuit for monetary damages.
The precise cause of actions underlying such a lawsuit would
depend on
the type and extent of the disclosure violation.
California’s
real property disclosure laws are imposed by statute and court
decisions in
order to protect purchasers from less than honest transferors, and, at
times,
their real estate licensees.
For example,
Civil Code Section 1102 et. seq. sets forth a set of statutory
disclosure
rules, which apply specifically to sales of residential real property
consisting of one to four dwelling units. Under
this law, sellers are required to deliver a statutory
“Transfer Disclosure Statement” ("TDS").
The Transfer
Disclosure Statement is intended to ensure that certain facts, presumed
by law
to affect the value and desirability of real property, are disclosed to
prospective buyers, so as to permit an informed decision by the buyer
as to
whether or not to take the property in question.
In
addition
to a leaking gasline, examples of conditions, which must be disclosed
within
the mandated TDS include, without limitation, encroachments, landfills, easements, existing
zoning/building code violations, any ongoing nuisance or other legal
disputes
affecting the property. Other
disclosures are periodically added to this enumerated statutory list,
such as
the disclosure of toxic and/or illegal substances exposure pertaining
to
affected real property.
Where
required, the Transfer Disclosure Statement must be delivered “as soon
as
practicable” either before execution of the sales contract, or
otherwise before
transfer of title. However, where the required TDS is delivered after
the
purchase agreement is signed, the buyer has the statutory right to
terminate
the contract with no further obligation, upon delivery of written
notice of
termination to the seller (or seller’s broker), within three (3) days
from the
date of personal delivery (or five (5) days after delivery by mail).
The statute
specifically provides that “any person who willfully or negligently
violates or
fails to perform any duty prescribed by any provision of this article
shall be
liable in the amount of actual damages suffered by the transferee”. This can include the aggrieved party’s out
of pocket loss, as well as the amount by which the actual value of the
property
is diminished by the undisclosed condition.
Separate
statutory grounds upon which to collect monetary damages exist for
certain
specific types of disclosure violations.
For example, there is a civil penalty of $5,000 per separate
violation
pertaining to the failure to make required disclosure pertaining to
toxic
and/or illegal substances.
In addition
to statutory disclosures, sellers of
real property (and their agents) are required to affirmatively disclose
to
prospective purchasers all material facts generally affecting the value
or the
desirability of said property, when such facts are unknown to the
purchaser,
and cannot be ascertained upon the purchasers' reasonable inspection or
investigation of the property.
In addition
to the damages arising out of a failure to comply with mandated
California
disclosure requirements and those arising out of fraud, other legal
remedies
may, also, be available to an aggrieved purchaser, depending upon the
circumstances, including claims for contractual rescission due to
mutual or
unilateral mistake.
There are
some statutory exceptions to the obligation to give certain disclosures. For example, the fact that a prior owner had
AIDS or the fact that a prior occupant died on the premises over three
years
before need not be disclosed.
The specific
circumstances of each case can affect the scope and extent of remedies
available in any given situation. For this reason, readers with
questions
regarding the complex subject of real property disclosure should
consult
directly with their own lawyers.
FD763 9/9/05
4\column\disclse6.req
Readers may address their
questions to The Real Estate
Lawyer, Fred M. Duman, 2807 Castro Valley Boulevard, Castro Valley, California
94546. Mr. Duman will answer those of
general
interest in his column. He reserves the
right to edit the letter for brevity and clarity.
Each real estate problem
usually has its own distinct
circumstances, and frequently is more complicated than realized by a
layperson. Readers are also encouraged
to consult with their own lawyers to obtain guidance concerning their
problems
when they first arise.
Readers are cautioned that
these answers are not intended
to be the basis for any action or reliance by the reader.
You are welcome to
visit our web site at “www.dumanlaw.com”.
© 2005, Fred M. Duman All Rights Reserved. Please see our disclaimer.
Back to Newspaper Columns
