I always advise our real estate sellers to reveal everything they know about their home in the mountain of disclosures we have them sign. It is a time for true confessions–and we do this for two very good reasons:
1. Buyers need to be fully informed by sellers regarding the home they are buying.
2. We wish to protect our sellers from legal consequences for failing to do so.
It turns out that sellers may now be held liable for partial disclosures–and could end up in court for half-truths. In the recent appellate court case of Calemine v. Samuelson, Seller Samuelson owned a condo which had a long history of lawsuits against the builder and subsequent contractors for water intrusion into some of the units in the condo development.
Samuelson reportedly revealed only the most recent repairs made in 1998, when he sold his condo in 2002. No water intrusion problems had occurred in his unit since those repairs. He also correctly noted on the the Transfer Disclosure Statement that he was aware of flooding, drainage or grading problems with the condos–but failed to list prior lawsuits against the builder (1986) and a repair contractor (1996).
And as luck would have it, Buyer’s garage flooded three years after close of escrow.
Would he have bought the condo if he had known about the prior litigation? Maybe, maybe not–but the buyer certainly has the right to know of matters that might impact his home and its value.
Of course, you and I might justifiably wonder about the consequences of a seller not being aware of litigation that may have occurred 20 years earlier. How can we disclose something about which we know nothing?
I think the answer might lie with the Homeowner’s Association’s management company providing a separate and simple form disclosing all past and current litigation affecting the property they manage. In fact, my husband and partner Mike Murphy sits on the board for the La Costa Chateaus HOA and is going to suggest that their management company issue this short report to all potential buyers of these La Costa condos.
That would help insure buyers are fully informed–and would protect sellers from potential litigation for failing to make full disclosure on items of which they may have no knowledge.