Prior to consummating a real estate transaction, the seller is required to disclose certain facts about the home, and the buyer typically engages in a thorough due diligence process to ensure that the home is free of significant defects. In certain states, including California, sellers are required to complete multiple disclosure forms attesting to the condition of their homes. After the sale, however, what are the rights of the purchaser to bring an action against the seller? The purchaser of the home can base liability for defects relating to the property in the following circumstances: (i) the seller committed fraud or (ii) the seller provided some type of warranty that has been violated.
Fraud. The seller of a home commits fraud when he makes a misrepresentation about an important fact related to the home. The seller must know that the representation is false at the time it was made and intend that the buyer rely on the representation as an inducement to purchase the home. Fraud can be committed through an omission as well as a misrepresentation. If the seller had a duty to disclose a material fact about the home, in accordance with state law, and failed to do so, he may be liable for fraud. If the buyer discovers the defect before closing the transaction, he may be legally entitled to rescind the sale. Following the close of the transaction, the buyer may recover money damages, or in some cases, the buyer may be entitled to cancel the transaction, depending on the law of the state and the nature of the defect.
Warranty. Sometimes a seller provides the buyer with a warranty relating to some aspect of the condition of the house. A warranty is an express or implied representation by the seller about the home that is intended to give the buyer an assurance about the state of the property. A seller’s warranty consists of a representation that the seller may not otherwise be legally obligated to make. However, in some states, once the seller provides the warranty to the buyer, then he is liable for any breach of the warranty.
A real estate contract may contain provisions concerning post-sale closing repair obligations. Where there has been no finding of fraud or a breach of warranty, these clauses should be reviewed to determine seller’s obligations, if any, after the close of the sale.
Contact Shane Coons at 949-333-0900 or visit his website at www.ShaneCoonsLaw.com to find out more about his practice.