Sellers beware! Disclose, disclose, disclose! A recent California appellate court case found in favor of a buyer who sued the seller for misrepresentation and negligence. What happened?
Throughout the years in his condominium, the seller had experienced periodic problems with water intrusion. In fact, the entire condominium complex was experiencing similar problems. The homeowners' association (HOA) for the complex sued the builder for the defect. Shortly thereafter, the HOA hired a contractor to repair the problems. After the repairs, the complex continued to experience problems with flooding. As a result, the HOA sued a second time for damages as a result of the contractor's repairs. A second contractor was then hired to repair the problems a final time, though the contractor warned that his work could not fully solve the problem. The seller had not experienced any further problems with flooding after the second repair.
Upon the sale of the condominium, the seller disclosed to the buyer that the property had experienced issues with water intrusion. In the disclosure documents, the seller also described the final repairs that had been made to prevent further water intrusion.
A few years after escrow had closed, the garage of the condominium flooded. The buyers discovered at that time that there had been two previous lawsuits that were not disclosed to them at the time of their purchase. The California court ruled in favor of the buyer. The court decided that the seller's disclosure of the repairs, and not of the lawsuits, was only a partial disclosure of the material information that should have been offered to the buyer.
What does this mean to you? Be sure that ALL material information that will affect the value of a property is disclosed to a buyer!
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