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Uncovering the Cover Up: Shedding Light on Seller Concealment

Purchasing a home can be one of the most exciting and most stressful events in your life. Many home buyers are disadvantaged in the transactional process because they simply do not buy many houses in their lifetime. There have been many cases of buyers moving into their home and finding major defects even after hiring the best inspectors and conducting their due diligence. The McMillan Law Group is highly experienced in representing buyers of real property during and after the close of escrow.

Seller's Duty

A seller of a home has a duty to the buyer to disclose all facts that materially affect the value or desirability of the property that are known or accessible only to the seller if the seller knows that such facts are not known to, and cannot be discovered by the diligent attention and observation of the buyer. Failure to fulfill this duty of disclosure is actual fraud. The seller must have actual knowledge of the defect.

Buyers have been successful in bringing actions against the seller for failure to disclose (1) a roof leak; (2) a land fill; (3) the condemnation of the land; (4) inadequate water well capacity; (5) building code violations; (6)violations of zoning ordinances; (7) improvements constructed without a permit; and (8) dedication of an easement immediately prior to close of escrow.

Agent's Duty

The seller's real estate agent is under the same affirmative duty to disclose facts materially affecting the value or desirability of the property that they know are not within the buyer's diligent attention or observation.

Additionally, the seller's agent can also bear negligence liability based upon constructive knowledge, or "should have known" knowledge. The agent owes a duty of care to all persons within the area of foreseeable risk, and they must act reasonably to prevent an unreasonable risk of harm to the buyer. The broker owes a duty to the buyer to inspect the property being sold, and where a defect that would have been discovered by a careful inspection, the broker is liable to the buyer for negligence for failing to conduct a careful visual inspection and to disclose material facts the inspection should have discovered. The buyer's ability to discover the defects by inspection does not relieve the broker of their duty, and it only relates to the issue of comparative negligence.

A buyer was successful in bringing an action against the seller's agent where the agent saw and recognized "red flags" that of soil problems but did not disclose them to the buyer. After the sale, the property suffered extensive earth movement. Because the agent owed the buyer an affirmative duty to make them aware of the soil problems, he was liable for the damage to the property. (Easton v. Strassburger (1984).)

Home Inspector's Duty

A home inspector who is not licensed as a general contractor, structural pest control operator, or architect, or registered as a professional engineer, must conduct a home inspection with the degree of care that a reasonably prudent home inspector would exercise. Bus. & Prof. Code, § 7196. Both the statutory duty owed by real estate agents and brokers and that owed by home inspection companies includes an obligation to discover and disclose certain defects in the property. Civ. Code, §§ 2079(a), 2079.16. When two or more parties have an obligation to discover and disclose the same defect, the failure of each to do so may be a proximate cause of a single indivisible injury to the person to whom the disclosure should have been made. In such cases, realtors and home inspectors will be jointly and severally liable to the purchaser for that injury. Leko v. Cornerstone Building Inspection Service, 86 Cal. App. 4th 1109, 103 Cal. Rptr. 2d 858 (2d Dist. 2001).

Pest Control Operator's Duty

A structural pest control operator, or pest inspector, is any individual licensed to practice structural pest control. Cal. Bus. & Prof. Code § 8506. Structural pest control is the identification of household and wood destroying pests and the recommendation or performance of work to control infestations of such pests. Id. at 8505. The pest control contractor may be liable for negligence or negligent misrepresentation if the report erroneously fails to report damage or conditions that may lead to future damage from wood-destroying pests or organisms, or other conditions of physical damage such as dry rot, which the report purports to include. Id. at §§ 8642, 8644.

We Can Make You Whole

The McMillan Law Group is highly experienced in representing buyers of real property during and after the close of escrow. If you believe that you may have a claim against the seller, seller's agent, or inspector involved in your home sale, call Alan Shepard at 858-375-1816.

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