Today's California Association of Realtors® Newsletter included an interesting story about a seller who was sued by a buyer three years after the close of escrow. Who was the winner?---You Be The Judge.
Here are the pertinent facts:
- In 2002 a seller enters into a contract to sell his condo.
- The seller fills out a Transfer Disclosure Statement (TDS) stating "that he was aware of flooding, drainage or grading problems and added a notation about water intrusion during heavy rains." In a subsequent conversation, the seller also described to the buyers the repairs made in 1998 to solve the water intrusion problem.
- The seller disclosed to the buyer in the Transfer Disclosure Statement prior to close of escrow that there had been a leak in the subject condo which had been repaired and waterproofed by a contractor and there had been no subsequent leaks.
- Nearly three years after the close of escrow the garage of subject condo flooded.
- The buyer sued the seller on the basis that full disclosure was not made at the time of the sale.
- The buyer learned that there had been intermittent problems with water intrusion in some of the condo complex.
- The buyer also learned that the HOA had sued not only the developer, but also the contractor hired by the association to affect the repairs and waterproof the affected areas.
- Fact - both lawsuits eventually settled and yet another contractor was hired to make necessary repairs.
- The second contractor stated that he "specifically informed the seller, as the HOA Treasurer and ‘point man' for the repair work, that it could only solve a portion of the problem."
- The buyers sued the seller and others for negligence and misrepresentation.
- The sellers response to the buyer's lawsuit was that the reason he didn't mention the lawsuits on the TDS was because he thought he was only obligated to disclose pending actions.
Do you think the court decided in favor of the buyer or the seller?
If you think the buyer won their case, you're right. The court decided that, "A condo seller who discloses a defect in the property may nevertheless be required to also disclose previous lawsuits regarding that defect." That was the decision of the California apellate court on February 17, 2009 in the case of Calemine v. Samuelson (2009 WL 368648). The court found that once "essential facts are disclosed a seller is not under a duty to provide details that would merely serve to elaborate on the disclosed facts and the evidence [in this case] revealed a triable issue of fact, as the existence of the two lawsuits was the very type of material information that a potential buyer could find seriously affected both the desirability and value of the property. Moreover, Samuelson's disclosing the repairs made by the HOA in the absence of providing information about the context in which those repairs were made could be characterized as a partial disclosure, likewise creating a triable issue."
So, a word to the wise...when in doubt, disclose, disclose, disclose.
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