Are you involved in a failure to disclose dispute in San Diego or anywhere in California?  What are the duties of a seller and buyer in a real estate dispute?  Why is the failure to disclose such an important legal issue?

The seller (and in some cases their agents) can be held financially and legally liable for the failure to disclose important defects or known issues with the property they are offering in San Diego or anywhere in California.  In many cases the failure to disclose major previous issues such as a foundation crack, termite or insect infestation, roof leaks, or other previously repaired issues will open the seller up to serious contingent liabilities.  The seller must also disclose known easements, environmental hazards and issues as well as existing zoning violations prior to consummation of the transaction.

The Transfer Disclosure Statement or TDS

In a failure to disclose dispute in California, how does the TDS impact duties of a seller and buyer?  Conditional property issues should be provided by the seller to the buyer in a document known as the “Transfer Disclosure Statement” or “TDS.”  The seller is required by law to provide the TDS as soon as possible before the closing of escrow.  This is usually done as part of the buyer’s due diligence which should include home inspections and disposition of a home warranty prior to entering into an agreement to purchase the property.  Once the TDS is provided by the seller, the buyer has 3 days to rescind or cancel the contract if the TDS was provided in person, and 5 days if it was delivered through the mail.  The TDS should include everything from repairs to known issues regarding mold or other environmental issues, noise or odors in the neighborhood or if there has been a death in the property in the past 3 years.

The Responsibilities of the Buyer in a Failure to Disclose Dispute

What are the responsibilities of the buyer in a failure to disclose dispute?  The buyer has the responsibility to conduct a “reasonable inspection” under California real estate law.  The buyer is required to perform due diligence and to conduct a thorough inspection.  The safest thing for a buyer to do is hire a certified home inspector.  The buyer cannot pursue a real estate dispute or file a legitimate lawsuit against the seller for a defect they should have found during a reasonable inspection, or that was disclosed prior to closing of the transaction.

California law limits the buyer to a legal action against a seller in these cases for failure to disclose material facts that have a substantial impact on the value of the property in question.

Pro-Tip: “When you buy or sell real estate in California, you are always worried you’re going to be buying something with major defects, or you’re going to be selling something and be accused of not disclosing a major defect that you had no idea was there. I mean, we see these disputes all the time. And at times, an unscrupulous buyer will come and say, “I think there’s a defect,” and try to pinch you for money after the sale or before the close.  Unfortunately, it happens all the time. So it’s good to know about defects and failure to disclose.

There’s two types of real estate defects.  There’s the obvious and there there’s the hidden, patent and latent defects. The seller is responsible for both, but the standard of care is different between the two. If it’s an obvious defect, the seller is more likely going to be in trouble if they didn’t disclose it. But if it’s so obvious, then the other side, the buyer, can’t say they didn’t know about it. And if it’s hidden, then how hidden is it and should you have known? And is it hidden to such an extent that the other side, the buyer, let’s say, couldn’t have known about it? 

The buyer may have a right to restitution if the choose not to buy the property in these cases of a failure to disclose.  The buyer asks the Court to just reverse the transaction and apply financial damages. So the buyer is entitled to the benefit of the bargain in California. This can include restitution, damages, interest costs, fees, escrow fees, and compensation for everything you went through.” – Dan Watkins, Founding Partner

The responsibilities of a seller and buyer in a California real estate failure to disclose dispute are quite complex.  The experienced real estate attorneys at the Watkins Firm have more than four decades of legal skill and experience in real estate disputes here in California.  We invite you to review our podcast Episode 43 – Real Estate Disputes as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.