THE ANATOMY OF A REAL ESTATE – NON-DISCLOSURE DISPUTE PART A: PRE-LITIGATION
With the tight real estate market for homes, we’re seeing an influx of post-Sale claims by Buyers alleging that Sellers (or others) failed to disclose defects in the property. Today, we’re starting a new 6 Part Series entitled Anatomy of a Non-Disclosure Dispute which will help you understand the process from having a dispute to reaching a resolution. At BPE Law Group, we have represented hundreds of buyers, sellers, agents, and inspectors in these very contentious legal disputes.
As always, if you have any questions about your real estate, business, estate planning, or any other legal issue, please let us know by e-mailing me at email@example.com.
Also, remember that we do legal presentations for business and community organizations. If your group would like this, please contact me or Steve to setup a date and time.
The purchase of a home is perhaps the most exciting time for both Buyers and Sellers of real estate. Both get the opportunity to move on to new adventures and start a new chapter in their lives. But sometimes, that excitement is ruined when Buyers subsequently discover some defect that they believe the Sellers failed to disclose. Typically, Sellers deny having done anything wrong. And so begins the very common and often very costly process of Misrepresentation / Fraud disputes.
This Article and several to follow will outline the legal components of a failure to disclose case and hopefully provide you with understanding that may resolve a dispute early or, alternatively, provide guidance in the legal process to follow. This will typically involve 14 separate activities which I have categorized under 6 separate stages of the dispute process. These are:
1. Determining whether there is a possible meritorious claim
2. Identifying the parties
3. Resolution attempts before starting legal action
B. DETERMINING REWARDS AND RISKS OF GOING FORWARD
4. Engaging an Attorney
C. DISPUTE RESOLUTION
6. Mandatory Mediation
7. Choosing Litigation or Arbitration
8. Settlement Efforts
9. Discovery / Deposition
E. TRIAL / ARBITRATION
10. Court Trial
11. Jury Trial
12. Arbitration hearing
F. GETTING PAID
14. Collecting on a Judgment
Today’s Article will focus on A. Pre-Litigation
1. DETERMINING WHETHER THERE IS A POSSIBLE MERITORIOUS CLAIM
– a. Claim must have “legal merit – For a Buyer to bring a claim against a Seller (or anyone else), they must first determine whether their possible claim has merit. This means that the facts that they are relying upon are reasonably sufficient that if proven true, would entitle the Buyer to receive compensation from the Seller.
– b. Defect must be Material – Material defects are anything which would impact the desirability of the home. Material defects are anything which would impact the desirability of the home. For example the existence of mold in the home would reasonably affect whether or not a Buyer would complete the purchase. In contrast, discovering a broken sprinkler head might not be material.
– c. Seller Knowledge – Faced with an unexpected defect and possible cost of repair, the Buyer often very quickly and emotionally comes to believe that they have been deceived. The Buyer must reasonably believe that the Seller knew or should have known of the defect and failed to disclose it to the Buyer. The challenge for the Buyer is that at the outset they may not have any proof of this since the Seller would typically deny any knowledge of the defect.
2. IDENTIFYING THE PARTIES
– a. Sellers – as referenced above, when an undisclosed defect is discovered, Buyers typically believe that the Seller failed to disclose the defect and that therefore the Seller should compensate the Buyer for their losses;
– b. Agents – Buyers sometime allege that the Seller’s Agent may have some responsibility for the Seller’s non-disclosure;
– c. Inspectors – prior to the Buyer completing their purchase, typically numerous inspectors will have examined the home and issued reports, ie: home inspectors, pest inspectors, roof inspectors, etc. Buyers may allege that such inspectors should have discovered and disclosed the defect in their inspections.
3. RESOLUTION ATTEMPTS
Commonly, a Buyer who believes they have been deceived will contact their real estate agent in the transaction, tell them the facts as they understand them, and request that their Agent contact the Seller with their complaint. Often the new address of the Seller may be unknown to the Buyer or their Agent, so the Buyer’s agent typically contacts their counter-part, the Seller’s agent, and conveys the substance of the complaint and the Buyer’s Demand, if any. The Buyer’s agent would then forward this information on to the Seller.
From this initial communication linkage, it is possible for a resolution to be achieved before anyone starts spending money on attorneys. However, most commonly Sellers deny any liability for the claims of the Buyer and may become emotional themselves about what they consider a wrongful accusation. Nevertheless, at this stage many small claims do get resolved regardless of merit since some Sellers will pay “nuisance money” to make the claim go away rather than hiring an attorney. In our experience at BPE Law Group, such early resolution attempts are successful perhaps 10% of the time.
NEXT: In our next Article in this Series, we will cover Section B: Determining the Risks and Rewards of Going Forward
For over 20 years, the attorneys of BPE Law Group, P.C. have been representing and assisting Buyers, Sellers, Agents, and Inspectors in handling real estate non-disclosure disputes as well as their other real estate, business, and estate planning needs.
If you have questions or want to schedule a Consultation now, give us a call at (916) 966-2260 to schedule a Consultation with one of our experienced attorneys. If you have an immediate question on this topic, please email Keith Dunnagan at firstname.lastname@example.org