Litigation alleging "failure to disclose" has increased over the last several years. California disclosure laws can be very black and white, but there are also areas that are quite gray. I remind clients to disclose anything that might affect a buyer's decision to buy their property, or anything that might influence the buyer's offer amount.
As an example, a buyer would not want to offer the same price for a property if he were aware the owner next door was getting ready to build a brand-new house that will block out much of his sunlight, or that the owner next door had three pitbulls that bark all day while the owner was at work. The buyer might come back later and suggest this information was known by the seller but not disclosed, and that had it been disclosed, he may not have purchased the property at all, or may have only been willing to pay a significantly less price.
You don't want to put yourself in a position where a buyer can use this against you. The important thing to remember is you are only obligated to disclose what you know.
In a case several years ago, the owners had not disclosed that the sewer line had numerous blockages that required rooter services many times. When the buyers took possession of the property, they soon faced problems necessitating a rooter service to clear the pipes. Once they decided to investigate the problem further, a neighbor told them this problem existed for many years and she had seen a Roto-Rooter truck parked in the driveway on numerous occasions. The new owners then found out the previous owners had written estimates for a sewer replacement but never followed through with the improvement. The buyers had evidence there were problems and the previous owners had not disclosed them. The court held that the buyers were justified and awarded the buyers half the cost of a new sewer line. This cost the buyers and the sellers a tremendous amount in legal fees, which could have been avoided had the sellers made the proper disclosure.
The most significant areas of litigation pertain to water penetration, drainage structural issues and known encroachments. Even though buyers have their own physical inspection, it is often difficult to determine issues pertaining to water. As everyone in California knows, we have very little rain, and opportunities to investigate water penetration are few and far between. On the other hand, a homeowner who has owned a home for many years may have experienced water penetration during rains and had knowledge of whether the water penetrates a sub area, windows, doors, skylight or a roof. These issues are often complicated when repairs are not black and white. Water penetrating a roof or skylight may be traveling from an unknown spot, and there may have been multiple unsuccessful or partially successful repairs. Perhaps it has not rained for an entire year and the owner decides the problem has been fixed but, upon the next rain, finds out otherwise. The burden is on the owner to reveal the history of these leaks and water penetration. The owner cannot determine that the problem has been fixed simply because there is no current evidence. Painting after making the repair and not disclosing the issue makes the case against the seller even stronger.
The biggest problems occur when an owner not only fails to disclose but also masks evidence. When an owner takes it upon himself to mask evidence of potential mold or a potential leak by either scrubbing or painting the area, he is interfering with the visual evidence that something may be wrong. Be sure to reveal the history of any known water leaks or mold before making cosmetic repairs, and explain that although the cosmetic repair has been made, there is no warranty the actual cause of the issue has been rectified.
Reveal everything you know about the property. Do not have sleepless nights worrying about things you do not know. Speak with your Realtor, and get advice on how to fill out your state's disclosure forms. My suggestion is to look at the home's exterior and interior. Go room by room, reminding yourself of anything unresolved. Include issues such as barking dogs, airplane noise, ongoing neighbor disputes and other issues that could affect the desirability of your property.
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