You Better Tell Them: California Real Estate Disclosure Law
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A recent Appellate Court decision sheds light upon California's complicated real estate disclosure law. In Pagano v. Krohn, 97 Daily Journal D.A.R. 15195, November 17, 1997, the Paganos purchased a condo from Ms. Krohn. The Court, in effect, said that Ms. Krohn, her real estate agent and the Paganos' agent disclosed all they needed to under the circumstances.
The facts were undisputed. The condominium association (Blackhorse Homeowners Association) had filed a lawsuit alleging construction deficiencies against the Developer. The condo in question had no problems that anyone knew of prior to the sale.
In addition, the Court noted the following facts:
1. Ms. Krohn told them that a lawsuit existed;
2. A consultant that the buyers' hired told them that downspouts and gutters were recommended to help with drainage;
3. The seller's agent told them that the lawsuit involved water intrusion problems; and
4. The buyer's agent gave them a letter from the Board of Director's explaining that the lawsuit had been filed against the Developer to toll the statute of limitations, and the Association was hoping to work out a settlement regarding downspouts and gutters with the Developer.
When they moved in, the Buyers had water intruding into their unit. They sued the seller, her agent and their agent on various theories relating to failure to disclose water intrusion problems.
The Appellate Court said that the seller and both agents disclosed all relevant information. The seller had experienced no water intrusion before selling her unit. None was apparent through a visual inspection and there was no reason to believe that the unit would suffer from water intrusion.
The buyer had enough information to make an informed decision whether or not to purchase the condominium. They had enough facts to decide whether to conduct further investigation about potential water intrusion problems.
The moral of this story is: Don't blame anyone but yourself if you are on notice of a potential problem and in the face of it, go ahead with the purchase. The Court will not help you.
CHECKLIST IF YOUR ASSOCIATION IS INVOLVED IN
OR CONTEMPLATING CONSTRUCTION DEFECT CLAIM
1. Ask your homeowner association board of directors or property management company if the Association's attorneys provide a current Real Estate Disclosure Statement.
2. Obtain a copy of the Summons and Complaint, if a Disclosure Statement is not provided or is not current.
3. Ask your property management company if the homeowners association has filed a Notice of Claim against the developer and, if so, get a copy of the Preliminary Defect List for the development. (Required under Civil Code §1375)
4. Pay special attention when completing the Seller's Standard Real Estate Disclosure Statement. Err on the side of over-disclosure.
5. Hire an independent home inspection during escrow from an insured inspection company with liability or errors and omissions coverage.
6. Ask your immediate neighbors if they are having any problems.
7. Find out if the Board is planning on filing a claim/lawsuit relating to construction defects any time soon. Get copies of any board correspondence to developer.
© 1999 Thomas E. Miller Law Office