Residential Non-Disclosure Matters with Tanner Brink
Selling or buying a residential property? Do you know the duties imposed on a seller regarding disclosures of issues with the property? Today I speak with Tanner Brink of McKenna Brink Signorotti LLP regarding these specific topics:
> Duties imposed on a seller of residential property under California law (Cal. Civ. Code Section 1102).
> What should be included in the disclosures.
> Is a buyer able to back out due to disclosures?
> Steps to take if unsure about whether to disclose or not.
> What about if a death has occurred on the property?
> Steps to take if you think you have a non-disclosure issue in a property transaction.
If you or someone you know has any questions relating to property non-disclosures, contact Tanner Brink at 925-433-5446, email him at tanner@mckennabrink.com, or check out our website at mckennabrink.com.
Take care and be well.
Transcript
Ryan Lockhart (00:02):
To the show, everybody, this is, I know a lawyer. I am Ryan Lockhart. Your host for today, this podcast is brought to you by McKenna Brink Signorotti, LLP. We are a full-service boutique law firm in Walnut Creek, California, where we practice in the areas of civil litigation, property disputes, tax estate, planning, and business law. You can check us out at mckennabrink.com for more information on how we can provide solutions to your legal problem. Today, we are talking about residential nondisclosure matters. Joining me is Tanner Brink, partner and one of the namesakes of McKenna Brink Signorotti. How are you doing today? Tanner
Tanner Brink (00:39):
Doing great. How are we my friend
Ryan Lockhart (00:42):
Doing all right? It's a fine Wednesday afternoon or morning. So that that's start diving into this topic. I'm pretty excited cause this, I think this affects a lot of people, especially when they're talking about buying or selling residential homes. So let's, let's just get right into these nondisclosure matters when it comes to these residential sales. It seems to me that the area of disclosures in residential sales keeps growing. I keep hearing this stack in escrow of disclosures is getting bigger and bigger by the year. So can you just provide a brief recap of the California law as it relates to the duties of the seller when they're selling a residential property?
Tanner Brink (01:18):
No problem. So California, like most States requires any seller residential property to disclose in writing details about that property that they have on the market. Okay. So these disclosure obligations apply to almost all California sellers of real property. That'll include your standard, residential home, a high rise condo unit or a mobile or manufactured home. The rationale or the reason why these are requirements is, is pretty straightforward and obvious a potential home buyer needs and wants to know as much as possible about their property in order to decide if they really want to buy it how much to offer if any repairs will be required. And they need to know how much money they will likely need to spend to make those repairs.
Ryan Lockhart (02:12):
Can you give us an idea on the timing of these disclosures? Like when would this seller, when would this help prepare them
Tanner Brink (02:19):
The sooner, the better ideally you want to have these disclosures done at around the time that they list the property for sale or have their first open house, open house that way that any potential buyers know what they're getting into.
Ryan Lockhart (02:35):
Hmm. So it sounds like a buyer would then have an opportunity to back out if they saw something in those disclosures, they didn't like, is that true?
Tanner Brink (02:43):
They can, and they can choose to have any inspections they want. If there are issues with the roof disclosed, they can get a roof inspection. If there's issues with foundation disclosed, they should get a foundation inspection. The, the, at least the law in California gives the buyer three days to back out of a deal if they don't like anything in the disclosures. If that, and that's personal delivery of the disclosures, if it's delivered by mail, then they have five days to back out. No questions asked.
Ryan Lockhart (03:17):
So that seems like a pretty short timeline, especially if they were going to try to go for their own inspections. The, but I'm talking about the buyer right now. If they, is there a different timeline, if they do their own inspections after these disclosures have happened and they discover like, Oh, this is actually a little bit worse than what the disclosure said. You know, let's say it's a foundational issue or something like that. Would that open up a new timeline for the buyer to back out
Tanner Brink (03:40):
That timeline is generally going to trail the inspection contingency. So you'll have anywhere from 14 to 17 days to do all your inspections and whatever you defined. You can decide whether to back out of the contingency or not, or to proceed. Okay,
Ryan Lockhart (03:56):
Great. So these disclosures, I, I think have they come through that could be a form what, what really needs to be included in this type of form for it to be effective legally.
Tanner Brink (04:08):
So in California, it's all detailed in civil code, section 1102. And the form itself is called a TDS or a transfer disclosure statement that TDS covers anything and everything almost. You're talking about structural information about the home roofs, foundations, windows leaks, anything like that,
Ryan Lockhart (04:33):
To be confused with TPS report, correct.
Tanner Brink (04:37):
We're going to need that TPS report. That's true. Yeah,
Ryan Lockhart (04:40):
Exactly. We're talking about TDS. Remember those folks, TDS transfer disclosure statements, your realtor broker should be able to help you with that. Obviously,
Tanner Brink (04:49):
What are you doing the cover sheet on that? We need a cover sheet on that TPS report.
Ryan Lockhart (04:53):
I forget the cover sheet. All right. So what do you do about the seller who is unsure about a particular issue. So let's say it's a gray area and they're just like, wow, should I really disclose this? Or maybe I don't want to, but it's my fall into the area that it should be disclosed. What would you say to that seller?
Tanner Brink (05:09):
So I always tell clients, or even friends of mine just be as honest and as forthright as you can. What you need to do is disclose anything that is deemed material. Okay. so you, you almost certainly don't need to disclose that there's a minor chip in the paint on, in the living room or that the kitchen floor needs to be cleaned more often than the bathroom floor. Things like that, minor things spackling the, a hole where you used to hang a picture frame. You know, those are minor issues, right? Not material to the sale of a property in California. If however, the paint is bubbling or the floors in the kitchen are buckling, cracking, falling apart. This would be material and it certainly needs to be disclosed, but
Ryan Lockhart (05:58):
It still kind of ties in with this buyer's responsibility to go inspect the property themselves. Correct.
Tanner Brink (06:03):
Well, it's separate, you know, the seller has a separate duty to disclose material conditions. Then the buyer does have duties to, to inspect those, but more to the point, the seller starts off with those duties to disclose what they know and to be honest.
Ryan Lockhart (06:22):
Okay. So let's one of the sellers going to disclose this particular issue? Let's say there was some crack crack in the foundation. I mean, I guess we hear about that quite a bit, especially with slab foundations here in California, where the grounds seems to be always moving, but do they have a duty to repair it or is it just a duty to disclose
Tanner Brink (06:40):
No, no, no duty to repair it. It's a duty to disclose and to be honest, right. The buyer has the buyer and the transaction can decide if they want to repair it reduce their offer, or if it's a minor issue simply overlook it and fix it themselves. For example, if there's a a broken sprinkler head and the seller discloses that well, is the buyer really gonna walk from a deal because there's a sprinkler head broken or are they just going to fix it? You know, that that's up to them, but more often than not, they're just going to fix it. If it's a minor issue,
Ryan Lockhart (07:20):
I'd hope they wouldn't walk, but I'm sure there's some people out there who probably would cause there are always, always unreasonable people out there, but as a seller, yeah, maybe it is. Maybe it's, it's a sprinkler head that water's like the whole yard just by itself. Who knows
Tanner Brink (07:34):
A gold golden sprinkler head,
Ryan Lockhart (07:36):
Golden sprinkler head. So one thing I, I think a lot of people have heard about it. Let's dive into a little bit, is this selling the property as-is? And I'm putting that in quotes, right. Air quotes as-is. Okay. Give us, give us the real deal on what as-is means when it comes to, you know, property sales.
Tanner Brink (07:55):
Yeah. I mean, we see that term in almost all contracts, residential sale contracts, and a lot of people do get confused on that term. Even though a seller or the contract itself includes the language this property is being sold as is if they fail to disclose known defects to the buyer, this can be actionable negligence or even fraud. The disclosure obligations, at least in California, take precedence over any as is language in the contract.
Ryan Lockhart (08:32):
Yeah, it makes sense. So you're as-it. Put this duty on the seller. It sounds like to me to disclose, well, what is as is when the buyer understands it's as is, but they start to understand what, what the property condition really is like. So it makes sense in that respect to me as well.
Tanner Brink (08:47):
Yeah. And if, if you're really not sure whether something should be disclosed or not would always recommend erring on the side of disclosing that because this avoids potential risk to you and you do want to give the buyer the full picture of the property so they know what they're buying.
Ryan Lockhart (09:09):
Exactly. And I'm sure this is going to be impacted and whether you're in a buyer's market or a seller's market, but you know, most people aren't going to walk away from a property, especially there's other interested parties, interested buyers just, just disclose. Cause what's the worst that can really happen if they walk away, then there's probably another buyer right behind them anyways.
Tanner Brink (09:26):
That's right. So honesty and full detail helps both sides.
Ryan Lockhart (09:31):
So there's another, I like to say that I like to dispel myths in the law. The other one, and I remember we, I learned a little bit about this in law school property class was what happens if there's a death, there was a death in the property. What are the duties to disclose when it comes to death on the property?
Tanner Brink (09:48):
Sure. so in California, the seller has to disclose if there was a death in or about the property in the past three years. So that's statutory, right. They're duty bound to do that. The caveat there is if the buyer or anyone affiliated with the buyer, their agent or broker asks the seller or their agent, if there was a death in the property going back five, 10 years, they have to be honest, right. They need to, they need to answer truthfully and say, yes, there was a death in the property that we knew about eight years ago, for example. So they, they need to be honest, even though it occurred after or longer than three years ago.
Ryan Lockhart (10:38):
Okay. So I would imagine there are some buyers are prior to us asking, has there ever been a death on this property, but it sounds like the seller would just have to disclose if they knew it. Obviously they're probably not going to know what happened to my property a hundred years ago, if it's that old, but if they know about it, err on the side of caution and disclose it. That's what I said.
Tanner Brink (10:55):
Correct? Correct.
Ryan Lockhart (10:57):
So what, how long does a buyer have to file a claim for a nondisclosure? Let's say so let's say they bought the property, the property closed, buyers in the home and it's three years down, three or four years down the road. And they discover some issue that clearly had been there for a long time and they want to go after the seller for nondisclosure, is there a time limit that they can do this?
Tanner Brink (11:24):
So it depends a lot of it depends on when you found out about the condition, right. And there's, what's called the delayed discovery rule, which can prolong any statute of limitations issue. So if you don't find out about the condition as the new buyer the timelines will be delayed accordingly.
Ryan Lockhart (11:44):
Okay. So let's roll with that situation a little bit more, buyer just discovered some issue with the property five years down the road sues the seller is what does the seller have and really do they have insurance that can step in to defend them or help them with this type of claim? Tell me a little bit about that.
Tanner Brink (12:04):
We have seen insurance coverage be applied to these types of claims. Again, it, it it's likely going to be your homeowner's policy of coverage. And it depends on the policy itself, how it's written. It also depends on what the claims are. Right? So if the claim is for example, that the seller had a roof leak, knew about it, didn't fix it. And instead just painted over the damage to the fixtures and furnishings below right. That is going to be more of an intentional act and intentional misrepresentation or even fraud. Those likely won't be covered by any homeowners coverage policies. Sometimes if it's just a knew or should've known standard or a negligence claim, those can, at the very least, the defense can be covered by your homeowners coverage. But it depends on the policy. It depends on the claims.
Ryan Lockhart (13:06):
Yeah. I often talk to clients about actions that are intentional or fraudulent and they think, well, yeah, but that was so long ago, they can't come after me. And I like to remind them that there's a whole different set of rules when it comes to fraud and how long claims can go or, you know, when that claim can be made. So don't, so key takeaway today, if you're selling your property, don't do any fraudulent activity to cover up any defects. One takeaway.
Tanner Brink (13:32):
I would agree with that.
Ryan Lockhart (13:34):
So let's say there's a listener out there and they have an issue with either a property they're about to sell and they have this question whether to disclose or not or it's a property they just bought. And they just discovered an issue that they think that the seller should have disclosed to them. And they may have some reason that the seller knew about it. What is this something that you can help them with and what would you think, you know, what would you recommend be their first step?
Tanner Brink (13:59):
So let's start off with the seller, right? So if you're the seller and there's a question in your mind about what you should or must disclose you should be able to talk with your realtor, a broker. If you have one in the transaction, they can advise you on that. Or you can always call us and go over the issue, what you are considering disclosing and why. And we can, we can discuss our recommendations. If you're the buyer of a property and you happen to find conditions that you feel should have been disclosed, but weren't again, give us a call anytime. We can go over your options. If it's just a brief phone call, we're not going to charge you for it. We're just going to give you our advice on our recommended course of action and how we address it. Great.
Ryan Lockhart (14:52):
So there is a role for the real estate agent and broker when it comes to the buyer, correct, or even a seller in that respect, but if it's really, if it really is going to be a legal issue, especially if they want to make a claim, then they should, I think they should definitely call you. Where would a potential, you know, homeowner seller or buyer reach you at which contact info?
Tanner Brink (15:18):
So my direct dials (925) 433-5446. And then I can be reached at tanner@mckennabrink.com. That's M C K E N N A B R I N K.com. And again, my name is Tanner Brink.
Ryan Lockhart (15:42):
All right, Tanner. Thanks for joining me today. Is there any final takeaway you would want to leave with somebody who's looking to sell their home? What should they be on the lookout for first?
Tanner Brink (15:52):
No, I think we've, we've covered it all, buddy. Again, if anyone out there has questions, feel free to give us a ring and it's been a pleasure.
Ryan Lockhart (16:00):
Thanks for joining me today. Of course you can always reach us at mckennabrink.com, hit the website. There's a lot of different area practice areas that we have that explain a little bit more in detail, what we do. My thanks to Tanner Tanner have a good rest of the week and congratulations. You made it on to episode four? Hey, I'm excited. All right, well, this should be up later today, so it should be good. This is also gonna correspond with our launch day of the podcast. So if you listen to this podcast episode and you'll know that it was launched on launch day today, July 22nd. All right, Tanner. Thank you very much. Take care everybody. This is, I know a lawyer. I'm your host, Ryan Lockhart, take care and continue to be well during COVID summer. Bye bye.