Anatomy of a Non-Disclosure Dispute – Part B: Determining Risks and Rewards
Today, we continue our Series entitled Anatomy of a Non-Disclosure Dispute with Part B – Determining the Risks and Rewards of Going Forward. 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.
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Legal Image ANATOMY OF A REAL ESTATE
Part B: Determining Risks and Rewards
In Part 1 of this Series, I covered the Pre-Litigation issues of (1) Determining whether there is a Meritorious Claim; (2) Identifying the Parties; and (3) Resolution Attempts before starting a Legal Action. Once that procedure has been handled, the Buyer must determine whether it is worth the time, trouble, and money to go forward and most importantly, what can be recovered if they are successful. That is the topic of today’s Article.
1. Engaging an Attorney
While it is likely that a Buyer may have already consulted with an attorney during the pre-Litigation process, engaging (hiring) an Attorney to evaluate all of the risks and rewards of going forward and outlining the steps and costs involved is the crucial next step. While virtually all attorneys have graduated from an accredited law school, have passed the very difficult California Bar Exam, and have been licensed by the State of California to practice law, that does not at all mean that any attorney can handle your real estate Non-Disclosure claim. Lawyers practice is many different areas such as Family Law, Bankruptcy, Commercial Law, Evictions, and many other areas which may have nothing at all to do with real estate law and, in particular, with real estate purchase and sale disputes. So it is critical when engaging an attorney that the Buyer first make certain that the attorney has specific knowledge and experience with representing parties in real estate disputes. They do not teach this is law school.
In California, there are a myriad of laws and standard contract provisions that determine not only how a real estate dispute must be handled but also what might be recovered if the Buyer is successful. For example, filing a lawsuit before pursuing Mediation might bar the Buyer from recovering attorney fees even if they win!
In addition to determining the attorney’s experience, the Buyer must understand that process that the attorney will use in representing the Buyer and obtaining the recovery the Buyer is seeking. Like any other hired professional, attorneys cost money and generally the Buyer will be paying up-front for the attorney fees as the case progresses. So it is critical that the Buyer understand the steps involved and have some idea what the legal costs will be. If the case is going to Trial or Arbitration, can the Buyer afford the legal costs? The worst thing that can happen is if the Buyer cannot pay mid-way through the case. What happens then? While it is impossible to know clearly at the outset how much a legal action will cost, attorneys can provide the Buyer with a rough estimate. If affordability is an issue, then it might be possible to limit the process such as doing written Discovery but not Depositions (I’ll cover these in a subsequent Article).
Engaging an attorney creates what is legally called an “attorney-client relationship” and like any relationship it imposes benefits and obligations on both parties, all of which should be clearly spelled out in the Attorney’s Representation Agreement.
Perhaps the most important question of all for the Buyer is “what can I recover if I win?”. While entire books and courses are dedicated to this question, the subject of Remedies must be covered when the attorney is first engaged. The legal process of adjudicating a real estate non-disclosure dispute can easily take over a year during which legal costs and other expenses will accrue. Can the Buyer recover enough from the Seller (and/or others) to not only pay these but also pay to repair the non-disclosed defect and provide some compensation for any of the hardship the Buyer has experienced during the process.
Remedies are often viewed in three separate categories:
(1) Actual Damages:
(also called “Incidental Damages) what is the actual loss to the Buyer as a result of the non-disclosed defect? California law generally limits a Buyer’s actual damages recovery to the “diminution of value” of the Property as a result of the defect. In other words, what would the Buyer have paid for the Property if they knew of the defect in advance? However, this isn’t open-ended. California law also limits these damages to “not exceed the cost of repair”.
(2) Consequential Damages: Unlike Actual Damages, consequential damages are indirect losses or expenses incurred by a Buyer as a result of the Actual Damages. For example, discovery of undisclosed mold in a home will result in actual damages for the mold remediation and repair of the Property physical damage. Consequential damages would include expenses if the Buyer had to move out of the Property during remediation and would also include medical bills for treatment of respiratory and other ailments alleged to have been caused by the mold.
(3) Legal Costs: The Contract between the Buyer and the Seller or, absent that, California law may require that certain legal procedures be followed if there is a dispute. These include Mediation costs, Discovery and Investigation costs, Trial or Arbitration costs, etc. These would have to be followed regardless of whether or not the Buyer is represented by an attorney. Generally, these costs might be recoverable by the successful party in the dispute.
(4) Attorneys Fees: In California, attorney fees are only recoverable by the Buyer (or prevailing party to the dispute) if there is either (a) a provision in the Contract signed by the parties providing for recovery of attorney fees; or (b) a law which provides for such recovery.
All claims for recovery of damages, costs, or fees will be subject to the determination of the Judge, Jury, or Arbitrator who ultimately decides the case. Merely asserting that a cost was incurred is not enough. The cost must still be “reasonable”. Further, it is important to understand that approximately 95% of all disputes end before the case goes to Trial or Arbitration. Some will resolve at the pre-Litigation stage; others will resolve during Mediation; or during Settlement Conferences. And some others will resolve when a lack of evidence might convince a Buyer or their attorney that a win is not likely. Under any such resolution, any amount paid or recovered by any party to dispute will be subject solely to what those parties agree upon.
NEXT: In our next Article in this Series, we will cover Section C: Dispute Resolution including (1) Mandatory Mediation; (2) Choosing Litigation or Arbitration; and (3) Settlement Efforts.
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