By: T. Keaton Turnipseed, Esq.
August 29, 2024
Let’s talk money, perhaps the most important question of all for the buyer is “what can I recover if I win?” and for the seller, “what can I be on the hook for or in the alternative, what do I get if I win.” While entire books are dedicated to this question and there is an entire law school class called “Remedies”, this part will give you at least a glimpse into the world of remedies for non-disclosure, while by no means addressing every possibility or every set of facts.
Actual Damages
Also called “Incidental Damages, actual damages represent 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”. As such, depending on the case, the cost to repair the damage or issue with the property may be on the table as an alternative. Practically, this is what is often looked to in mediation. For example, the amount of money to patch the roof or repair the leaking AC unit.
Here it is important to note that the buyer must prove that damages along with the rest of the case. Usually this involves estimates or invoices for repairs. The court does not simply take the parties word for the amount of harm they have incurred. The seller can also counter those damage estimates by obtaining their own.
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’s 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. Again, the buyer must prove those damages.
Recission
Recission is a rarely used remedy that in short runs back the transaction, i.e. the buyer returns the property to the seller, and the seller returns the purchase price to the buyer. It is worth noting that if a court does not award rescission, the plaintiff buyer may still recover money damages in the action.
Recission is not an often-sought remedy or practical resolution for non-disclosures for two simple reasons, first buyers usually want the house they have purchased, save the undisclosed defect. As such, it is the rare case where recission is the relief a plaintiff wants in a lawsuit. Second, in settlement negotiations, even if the buyer wants to rescind, it is not practical in a majority of situations simply because the seller likely does not have the funds to pay back the purchase price. Most sellers use sale proceeds from a home to buy a new home and thus do not have the required funds on hand. As such, recission is an option but in most cases, it is not a practical one.
Attorney Fees
Generally, attorneys’ fees are not available in litigation. However, under the California Residential Purchase Agreement and Joint Escrow Instructions the prevailing party to the dispute, this means either buyer or seller if they win at trial or arbitration, may recover reasonable attorneys’ fees so long as they have mediated prior to litigating the dispute. 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. Importantly this provision of the Residential Purchase Agreement places some risk on the buyer plaintiff if they lose at trial because they could be on the hook for the cost the seller incurred defending the suit.
The fees must still be “reasonable”. For example, the client who is billed for 10,000 emails throughout the course of litigation because they demand an email update from their attorney is not incurring reasonable costs and is unlikely to recover for those. All that to say, the court will exercise discretion in determining what is and is not reasonable in the context of fees.
Further, it is important to understand that approximately 99% 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; yet 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. In practice one of the first things that is taken off the table are attorney’s fees.
