By: D. Keith Dunnagan, Esq.
February 6, 2024
You look for that new home, maybe it is your starter home and you stretched financially to get that first home. Maybe, it is your “dream” home; or maybe it is your retirement home. Any way you look at it, you expended significant sums of money to acquire what for most people is the single largest purchase they will make during their life. Their home. All is well, until that first storm hits. When all of the sudden drops of water begin to drip from the light fixture (this actually happened to me). Or water pooled in the garage. Or there was river flowing through the crawl space. Or water was pouring in around a sky light. You get the picture. The dream home just became a vision of Walter Fielding and Anna Crowley’s worst nightmare. The next question naturally becomes – what are my rights?
California law requires sellers to disclose to potential buyers, in writing, any “material” facts that may affect the potential buyer’s desire to purchase the property, or the price the buyer is willing to pay. Material facts frequently involve information concerning a property’s roofs, windows, grading and drainage. While not an exhaustive list, these areas in particular can cause the most resultant property damage, high remediation costs and thus trigger a large percentage of failure to disclose cases. Water intrusion can have many effects on a home. These include: Damage to wood furniture, household appliances, plumbing equipment, electronic equipment, and upholstery. It can also result in a risk of mold growth and in rare cases health issues stemming from mold and contamination.
In California, with months or years of dry weather punctuated with drenching winter storms, water intrusion defects, which might otherwise go unnoticed, can become very apparent. That is why sellers and their agents must accurately disclose material facts by completing a “Transfer Disclosure Statement” (TDS). After heavy rains, if you observe leaks around windows, ceiling stains, or surface water pooling, check your TDS to see if the seller disclosed a prior same or similar defect that is now troubling you.
Just because a TDS does not have a particular disclosure does not necessarily mean the seller or agent failed to disclose. Under Civil Code §1102.4, “Neither the seller nor any seller’s agent or buyer’s agent shall be liable for any error, inaccuracy, or omission of any information delivered pursuant to this article if the error, inaccuracy, or omission was not within the personal knowledge of the seller or that listing or buyer’s agent, was based on information timely provided by public agencies or by other persons providing information as specified in subdivision (c) that is required to be disclosed pursuant to this article, and ordinary care was exercised in obtaining and transmitting it.” Each disclosure required by law shall be made in good faith. For purposes of this article, “good faith” means honesty in fact in the conduct of the transaction.
If at the time the disclosures are required to be made, an item of information required to be disclosed is unknown or not available to the seller, and the seller or his or her agent has made a reasonable effort to ascertain it, the seller may use an approximation of the information, provided the approximation is clearly identified as such, is reasonable, is based on the best information reasonably available to the seller or his or her agent, and is not used for the purpose of circumventing or evading disclosure requirements.
When it comes to water, when in doubt, disclose. Taking such a stance is not just good practice it’s the ethical thing to do and a smart practice. In addition, the delivery of a report or opinion prepared by a licensed engineer, land surveyor, geologist, structural pest control operator, contractor, a C-39 roofing contractor conducting a roof inspection pursuant to subdivision (d) of Section 7197 of the Business and Professions Code, or other expert, dealing with matters within the scope of the professional’s license or expertise, shall be sufficient compliance to a seller’s disclosure requirements.
If you are the buyer and have a water issue, do not hesitate to tender a claim to your homeowner’s insurance policy. The types of water damage covered through insurance typically include sudden or accidental discharge, overflow, flood, and sewer or water backup. Gradual damage may also be included, but it must not have been a problem that was deliberately neglected. If the insurance carrier does not cover the damages they might be able to explain why: you might have been the victim of an unscrupulous seller, or simply suffering from bad luck.
Buyers and sellers in this situation need to seek counsel. Buyers need to understand their rights and remedies related to the undisclosed defect. They need to understand how to make the claim consistent with the contract to buy the home. One of the most overlooked provisions in the purchase contract is the mediation obligation. Incidentally, a seller that receives such a demand should not ignore the demand. There are potentially significant contractual consequences to ignoring a buyer’s demand. Further, the seller needs an assessment of the claims made and liability exposure. Both parties should engage competent counsel related to such claims.
The attorneys at BPE have decades of experience assisting home buyers and sellers related to non-disclosure claims. Our attorneys regularly advise home buyers, sellers, real estate agents, brokers and real estate associations on disclosure requirements as well as remedies and obligations related to disclosures in a real estate transaction. If you are involved in a non-disclosure situation, do not hesitate to contact our office at 916-966-2260.
The information presented in this article is not to be taken as legal advice. Every situation is different. If you are facing a legal issue of any kind, get competent legal advice in your state immediately so that you can determine your best options.