Friday, February 20, 2009
Disclose Disclose, Disclose
A condo seller who discloses a defect in the property may nevertheless be required to also disclose previous lawsuits regarding that defect. That was the decision recently rendered on February 17, 2009 in the California appellate court case of Calemine v. Samuelson (2009 WL 368648).
In this case, Walter Samuelson owned a unit in a condominium complex which had intermittent problems with water intrusion. In 1986, the homeowners’ association (HOA) sued the developer for design and construction defects. In 1992, the HOA hired a contractor to repair and waterproof the affected areas. By 1996, the HOA also sued the contractor it hired for ineffective repairs. Both lawsuits eventually settled. In 1998, the HOA hired another contractor to make repairs. The new contractor specifically informed Samuelson, as the HOA Treasurer and “point man” for the repair work, that it could only solve a portion of the problem. Samuelson’s unit did not suffer from water intrusion after the 1998 repairs.
In 2002, Samuelson entered into a contract to sell his unit. He properly disclosed on the Transfer Disclosure Statement (TDS) that he was aware of flooding, drainage or grading problems and added a notation about water intrusion during heavy rains. In a subsequent conversation, Samuelson described to the buyers the repairs made in 1998 to solve the water intrusion problem.
Nearly three years after the close of escrow, the condominium garage flooded. It was only then that the buyers first learned of the lawsuits. The buyers sued the seller and others for negligence and misrepresentation. Samuelson claimed he didn’t mention the lawsuits on the TDS because he thought he was only obligated to disclose pending actions.
The court ruled in favor of the buyer. The court stated that once “essential facts are disclosed a seller is not under a duty to provide details that would merely serve to elaborate on the disclosed facts.” However, the court added, “the evidence [in this case] revealed a triable issue of fact, as the existence of the two lawsuits was the very type of material information that a potential buyer could find seriously affected both the desirability and value of the property. Moreover, Samuelson’s disclosing the repairs made by the HOA in the absence of providing information about the context in which those repairs were made could be characterized as a partial disclosure, likewise creating a triable issue.”
* California Association of Realtors Legal 02/20/2009