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What Must a Seller Disclose About Property Defects?

William B. Hanley, Attorney At Law March 28, 2022

The California real estate market has been rising rapidly in valuations since the onset of the pandemic and low-interest-rate mortgages. The California Association of Realtors (C.A.R.) reports that the median home price in 2022 is set to rise 5.2% to $834,400 after a projected 20.3 percent raise to $793,100 in 2021 from 2020.

With home values so high in the Golden State, and given the fact that a home is the biggest investment most people will ever make, are there any protections in place to prevent you from purchasing a home that drains your pocketbook with fixes that you never anticipated?

Fortunately, California has strong laws in place to protect buyers and require sellers to reveal defects before they sell their property. How many buyers actually take the time to examine the Transfer Disclosure Statement (TDS) required by law? Or is it just another ream of paper that passes almost unnoticed to the buyer?

If sellers fail to disclose defects and their property is sold, the buyer can have recourse to recover any losses or damages resulting from trying to hide structural issues or other problems. The buyer also has an obligation to carefully read every document, including the TDS, and to conduct inspections of the property before purchase.

If you’re buying or selling a residence in or around Irvine, California, or anywhere in the counties of Orange, Los Angeles, or San Diego, contact William B. Hanley, Attorney at Law to help you exercise due diligence in the transaction and protect yourself from possible legal actions. William B. Hanley, Attorney at Law has over forty years of experience in real estate law and can help you make sure your sale or purchase is going through in the proper way.

California Disclosure Laws

California Civil Code requires sellers of homes in the state to complete what is called the Real Estate Transfer Disclosure Statement (TDS), listing any potential or real defects in the property that is being sold.

The code is a bit ambivalent about when the TDS must be presented to a prospective buyer, saying only that it should be done “as soon as practicable and before the transfer of title.” The buyer then has “three days after delivery of the disclosure in person or five days after delivery by deposit in the United States mail to terminate the offer or the agreement by delivering a written notice of termination to the seller or the seller’s agent.”

The TDS is required for the sale or exchange of real property of one to four dwelling units, including mobile homes. Exemptions exist for foreclosure sales, court-ordered transfers, transfers of a decedent’s estate, transfers from a dissolution of marriage, transfers from one co-owner to another, or the sale of new homes in a subdivision when a public report must be delivered to the purchaser, among a few other exceptions.

The TDS consists largely of a series of checkboxes where the seller can note “any significant defects/malfunctions” in the property being sold. Failure to disclose a known defect can expose the seller to legal liability once the deal closes. The checkboxes range from interior walls and ceilings to plumbing and electrical systems and other structural components. 

For instance, if there’s a leaky roof and the seller paints over the damage to the area and then doesn’t disclose it on the TDS, the buyer can then hold the seller liable to repair the roof once the leak becomes apparent and for damages.

Prospective buyers also should conduct their own due diligence by having a professional home inspector examine the property prior to purchase and make repairing any defects a part of the purchase agreement.

Of course, property insurance, home warranties, and homeowner associations (HOAs) may also be involved in the repair of any defect and resulting damages, but that does not relieve the seller of their disclosure responsibilities.

Getting Experienced Legal Guidance

Buying a home is a huge investment, probably the biggest most people will ever make, so it is incumbent on the buyer to make sure there aren’t any hidden defects or problems with the property they’re purchasing. Likewise, the seller must not deliberately hide any defects or they could be exposed to costly legal damages for repairs, maybe even the rescission of the sale.

If you’re involved in a real estate transaction anywhere in the counties of Orange, San Diego, or Los Angeles, contact William B. Hanley, Attorney at Law to advise and guide you on every step of the process, especially when it comes to reading the many documents involved to see if you’re fully protected.