I am in escrow to buy a property. We have noticed that this building has several cracks and most likely serious foundation problem. We have been told that in state of California the owner should inclose all the serious and exciting issue and needs to fix it. However the seller seems not willing to fix or address the issue by either fixing it or discount the price.is there any law in California in this regard. We don't know how much this will cost it can be 20,000. To 100,000.$
We need to hire geologist and structural company then a contractor and adding city permit ,...
Which are very costly to find out. I have been told it is sellers responsibility to sell the property in good standing condition, and even if he sells it this way because it has this exciting condition, he will be responsible for it even after sell. Is it true?
What is the law and how California protect the buyers ?
This is a regular sale , I have told even in case of foreclosure , Even banks can not get away from such a big issue?
Would you please provide me some advice so I can talk to them based on what law is in California. Our agnates don't know anything about the legal matter in this case. This is a commercial property not home.
3 Answers from Attorneys
In California, the seller must "disclose" not inclose. The seller does not have the obligation to repair, but what is disclosed may affect what the buyer is willing to pay to buy. What must be disclosed is governed by two different sources of law. The first area is what is known as items that must be disclosed as required by statute. A good pamphlet on that type of information is contained here: http://www.dre.ca.gov/files/pdf/re6.pdf
The other area of items to be disclosed are items that are not on that list that would be material to the transaction. This is a grey area set forth by case law. "It is the law of this state that where a real estate broker or agent, representing the seller, knows facts materially affecting the value or the desirability of property offered for sale and these facts are known or accessible only to him and his principal, and the broker or agent also knows that these facts are not known to or within the reach of the diligent attention and observation of the buyer, the broker or agent is under a duty to disclose these facts to the buyer." (Easton v. Strassburger (1st Dist. 1984) 152 Cal.App.3d 90, 99.)
Note that these sources of law impose a duty to disclose, not to correct. It is up to the buyer to determine whether to purchase the property given the disclosures, or to refuse to consummate the deal because of the disclosures.
Mr. Roach is entirely right. The only obligation the seller has is to disclose known issues. There is no obligation to fix anything unless the buyer and seller agree that the sale is conditioned on the repairs being completed. In northern California, it is customary for the seller to be obligated to repair "Section I" items on the wood destroying organisms report, or give a credit against the purchase price in escrow, but even that is negotiable. If the seller wants to sell a building even in "tear-down" condition, the seller has no further obligations once the buyer agrees to buy it that way. If your seller thinks they can find a buyer at their price without fixing anything, they are under no obligation to discount the price to you. You are free to walk away from the deal due to the defects, but they are just as free to say "take it or leave it," while you are still under the inspection contingency. The only exception to the "disclose and negotiate" rule, is that the developer and builder of new construction are responsible for the building for a certain amount of time after it is built, but that doesn't sound like your situation.
I would also add that everything Mr. Roach and I have told you is "Kindergarten" level law that every real estate agent and broker should know. It is on the license tests for agents and brokers. So if this deal doesn't go through, you should fire your agent.
Finally, I'd emphasize that a seller's duty to disclose, especially in a commercial-property transaction, is limited to things that the seller "knows." This is kind of a slippery term, because it includes items that the seller should know about, or is logically presumed to know about. For example, when the seller is a resident in a home, he would be presumed to know that the roof was leaky. If the seller is an absentee owner, and the house is rented, he is not presumed to know because he hasn't been there when it was raining. In the case of a commercial building, an owner/seller might not know about foundation cracks if the owner/seller is in Chicago and the building is in Los Angeles. However, if the tenant and the owner have been corresponding about the need for an evaluation and repairs for over a year, the presumption is entirely different and the owner is not only presumed to know, he would be held to have actual knowledge.