Property Condition Disclosure Highlights: 4Q 2019

The Property Condition Disclosure cases retrieved this quarter addressed property disclosure statements with regards to easements and defects identified after the properties were purchased. Property condition disclosure issues were identified in six cases.

1. Ribeiro v. K&D Builders, Inc., No. 2019-CA-000069-MR, 2019 WL 5681182 (Ky. App., November 1, 2019)

Failure to comply with the disclosure statute in a timely fashion constituted sufficient grounds for vacating an arbitration decision.

The buyer purchased a home in Louisville in October 2016. The house was built by K&D Builders “in the mid-2000's on speculation,” and was used as a rental property between 2007 and 2016. The buyer and her agent toured the house on two separate occasions. After the second visit, she made a written offer to purchase the property. K&D Builders accepted the offer, and the parties entered into a purchase/sell contract that provided for arbitration of any dispute or claim regarding the transaction. The property was inspected before closing by a licensed inspector, and the inspector determined that the house was “fundamentally sound.” K&D Builders made certain repairs to the house as requested by the buyer. At closing, the buyer accepted a general warranty deed from K&D Builders. In March 2017, the buyer moved out of the home, citing defects in the interior and yard. The buyer then commenced arbitration proceedings against defendants, claiming they intentionally deceived her into purchasing the property by withholding or misrepresenting  material information regarding the condition of the home. The buyer also alleged that K&D's agent violated his statutory duty to deliver a disclosure statement to her before closing. Additionally, the buyer alleged her agent breached her fiduciary duty by failing to advise her against purchasing the property without reviewing the seller's disclosure.

The arbitrator concluded that the buyer did not suffer any damages because there was nothing wrong with the house. Even if damages had been sustained, they were not caused by a violation of the seller's agent statutory duty. Therefore, the buyer could not establish a breach of any fiduciary duty  owed to her. On appeal, however, the appellate court held that the failure to comply with the disclosure statute in a timely fashion constituted sufficient grounds for vacating the arbitration decision. The Appellate Court vacated and remanded the case to the lower court for entry of an order granting a new arbitration.

2. Shalant v. Wieger, No. B295087, 2019 WL 6520907 (Cal. App., December 4, 2019)

Purchaser alleged he was deprived of the opportunity to negotiate lower price.

A purchaser agreed to buy a home in Santa Barbara for $1,124,500. After the escrow on the property closed, the purchaser claimed that he was unaware that a pipeline easement ran adjacent to the living room of the home when he signed the offer to purchase. This alleged material defect affected the  property value. During the escrow period, purchaser learned of the easement from documents provided by the escrow company, including an amended written transfer disclosure statement. The purchaser alleged he was “deprived of the opportunity to negotiate a lower price of the property” and subsequently sued the seller's real estate agent and the agent's company for fraudulent concealment, claiming he never received a timely transfer
disclosure statement that would have allowed him to negotiate a lower purchase price in light of the pipeline easement.

The appellate court concluded that the purchaser’s admission that he had actual knowledge of the easement prior to the close of escrow precluded him from establishing that he was unaware of the easement and would have acted differently had he known of his existence. The appellate court affirmed the dismissal of purchaser's first amended complaint without leave to amend further.

Statutes and Regulations

No Property Condition Disclosure statutes or regulations were retrieved.

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State Law Based Changes

Read a summary of this quarter's additions to the State Law Based Changes.