When in doubt, disclose, disclose, disclose

By
Real Estate Agent with HomeSmart Realty West CalBRE #01458572

If you leave a comment, Jim will visit your blog and leave a comment.A couple of years ago I worked both sides of a transaction for a real nice condominium. The Seller, who was 67, had lived there for over thirty years. Not only had he lived there for over thirty years, but he was an original owner, as well. If you do the math, you'll realize that the condominium complex was built in the 1970s, and if you think real hard, you'll probably come to the conclusion that it had popcorn ceilings. Your conclusion would be correct.

Fast forward to the sale, which closed escrow with no problems, and remember that I represented both the Buyer and the Seller. The Buyer went to remove the popcorn ceilings and found water stains, stains which her renovator said would cost about $5,000 to repair. Now to me there's a difference between stains and damage, although stains can indicate underlying damage.

Condominium towersSeventeen years ago the condominium above his had a plumbing leak which left some stains on the Seller's ceiling. Everything was repaired and the ceiling repainted. Unfortunately, I didn't find out about this until the Buyer was in the midst of renovation, and even then it took a lot of work to drag out of the Seller the fact that seventeen years ago there was a leak. I could not get the Seller and Buyer to agree on anything, so the case wound up in Small Claims Court. From what I heard from both sides, it looked like the odds were stacked in favor of the Buyer. Surprisingly, the Judge found in favor of the Seller, stating that a problem seventeen years ago that had been repaired would not necessarily be an issue that needed to be disclosed.

Now today I'm reading Calemine v. Samuelson, a February 17, 2009, decision issued by the California Second District Court of Appeal. The basic premise of the case is that the Calemines had bought a three-story condominium in 2002, and the lower level garage had flooded in 2005. Apparently there had been flooding problems between 1983 and 1999, although the latter date doesn't jibe with other facts.

In 1986 the HOA sued the developer, and in 1992 hired Westar Flooring to repair and waterproof the affected areas. The work was ineffective, and the HOA sued Westar Flooring. Construction Headquarters was then hired to do repairs, which were completed in 1998. Here's where the date doesn't jibe: the Seller did not have any further flooding problems but did have occasional damp spots during periods of heavy rain.

CondominiumThe Seller, Samuelson, disclosed that he was aware of "flooding, drainage, or grading problems," but stated that he was not aware of "any lawsuits by or against the seller threatening to or affecting this real property, including any lawsuits alleging a defect or deficiency in this real property or common areas...."

Samuelson indicated that he said no because he thought the form required disclosure of lawsuits that were pending, not lawsuits from the past that had been resolved.

The trial court found in favor of Samuelson, but the appellate court reversed that decision based on an earlier case, Pagano v. Krohn (November 1997), which found that sellers have no duty to go into detail about the type or scope of repairs, but did have a duty to disclose the existence of previous lawsuits, even if resolved, and not just pending or ongoing lawsuits.

Both Pagano v. Krohn and Calemine v. Samuelson were certified for publication, which means that they create case law rather than statute law.

Just one more example of "When in doubt, disclose, disclose, disclose."

*****

Jim Frimmer, Realtor, Century 21 Award Mission Valley
California real estate license #01458572
619-729-5701 -- jimfrimmer@century21award.com

*****

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*****

This week's posts:

  1. WWW (Wordless Wednesday with Words): Torrey Pines Gliderport slide show - 6/30/09
  2. A day late and a dollar short. So sad for my Client - 6/29/09
  3. Growth Leader, Week Eleven - 6/29/09
  4. Red light cameras in the City of San Diego - 6/29/09

Last week's posts:

  1. SST (Speechless Sunday with Text): Federal Stimulus money and universal health care - 6/28/09
  2. Realtors have been (still are?) part of the problem - 6/27/09
  3. East San Diego County numbers you can use - 6/25/09
  4. East San Diego County municipal goverment numbers - 6/25/09
  5. Recycling centers in East San Diego County - 6/25/09
  6. Growth Leader, Week 10 - 6/24/09
  7. WWW (Wordless Wednesday with Words): San Diego Zoo tiger slide show - 6/24/09
  8. Encinitas ranked #3 surf town in America - 6/23/09
  9. Should we put our own house in order first? - 6/22/09
  10. Presenting Mission Greens in Mission Valley, San Diego, California - 6/22/09

Previous week's posts:

  1. I might play the lottery now! - 6/21/09
  2. The $2 million candle.... (and you thought real estate was expensive) - 6/21/09
  3. Why didn't schools have positive reinforcement when I was young? - 6/21/09
  4. SST (Speechless Sunday with Text): Pink flamingo nesting season - 6/21/09
  5. Make a splash on the SEAL - 6/19/09
  6. Presidio Place in Mission Valley, San Diego, California - 6/18/09
  7. Growth Leader, Week Nine - 6/17/09
  8. WWW (Wordless Wednesday with Words): San Diego Zoo slide show - 6/17/09
  9. San Diego Trolley - 6/15/09

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Rainmaker
640,298
Marchel Peterson
Results Realty - Spring, TX
Spring TX Real Estate E-Pro

Jim, we live in the age of disclosure.  I always tell my clients if in doubt disclose, disclose, disclose.

Jul 01, 2009 11:23 PM #1
Rainmaker
335,497
Matt Listro
National Credit Fixers - Matt Listro - Vernon, CT
Your Credit Repair Expert

Hi Jim: wow - I guess it is better to be safe than to be sorry!

:)

Jul 01, 2009 11:44 PM #2
Rainmaker
239,051
Matt Grohe
RE/MAX Real Estate Concepts - Des Moines, IA
RE/MAX Des Moines

Jim: That's always good advice. However, if the law does not require disclosure and the courts uphold that disclosure need not be made then disclosure is not required and does not serve the clients best interest. As an agent I work for my client, not potential customers.

Jul 01, 2009 11:45 PM #3
Ambassador
937,625
Ralph Gorgoglione
John Aaroe Group - Los Angeles, CA
California Real Estate (800) 591-6121

Yes.

A lesson I learned from day 1 when I first hung my license with my broker.

My manager constantly reminded us of the legal nightmares that can happen when you do not disclose.

Jul 02, 2009 01:06 AM #4
Rainmaker
468,836
Janice Roosevelt
Rory Burkhart Team, Keller Williams - West Chester, PA
OICP ABR, ePRO,Ecobroker

Absolutely, positively, couldn't agree more, just keep saying it and doing it!

Jul 02, 2009 06:34 AM #5
Rainmaker
286,611
Marilyn Harrell
ReMax Riverhaven - Beaverton, MI
Wixom Lake - Beaverton MI

Funny thing - you can be sued for what you don't say or what you do say!!!!  Is one better than the other?

Jul 02, 2009 07:26 AM #6
Anonymous
Anonymous

Absolutely!  Better that everything is known up front.

Jul 02, 2009 10:02 AM #7
Rainer
70,066
Pangaea Interior Design Home Stager - Redesign - Model Homes
Portland Oregon - Portland, OR

Sounds like a real can of worms to me. Bazaar that you would need to disclose things that went wrong years ago but have been completely fixed.

Jul 03, 2009 02:39 AM #8
Rainmaker
1,109,053
Jim Frimmer
HomeSmart Realty West - San Diego, CA
Realtor & CDPE, Mission Valley specialist

Hey, Marchel - Sometimes it's difficult to convey to people how important it is to disclose even the smallest thing. That's why I like to save stories like mine since they are good illustrations.

Hey, Matt Listro - Being safe can help prevent sorry for a lot of people involved in real estate transactions.

Hey, Matt  Grohe - I wish it were as simple as that here in California, but with all the liability we have, it's not. In this case, the Court ruled that disclosure of something 17 years in the past that was resolved was required. It's just the details that are not. Home inspectors have 5½ years of liability here, so I imagine Realtors have at least that amount of liability, too, because if a home inspector gets sued, it's a cinch that everyone else who was involved in the transaction is going to be sued, too.

Hey, Ralph - And someone famous said recently, "It's going to get worse before it gets better." Personally, in the case of real estate, I don't think it's going to get better.

Hey, Janice - Keep on keepin' on, as long as one is keepin' on properly - LOL.

Hey, Marilyn - Or as my mom used to say, "Darned if you do, darned if you don't." Well, actually, she used a different D word.

Hey, Irene - If only we could convince our Clients that playing cards on top of the table is far better than playing cards under the table.

Hey, Pangaea - I can heartily agree with you there, but then there are a lot of things in real estate, and with being a Realtor, that are bizarre. Maybe that's why we love it so much! LOL

Jul 03, 2009 11:50 PM #9
Rainmaker
122,079
Jim Valentine
RE/MAX Realty Affiliates - Gardnerville, NV

That is our mantra when it comes to disclosure, "when in doubt ... disclose."  The problem with what you have is that you didn't know about it.  How can you disclose what you don't know about?  Frustrating situation. 

Jul 04, 2009 07:53 PM #10
Rainmaker
543,329
Toula Rosebrock
Diane Turton, Realtors, Forked River, NJ - Lacey Township, NJ
Broker/Sales Associate, Realtor, Lacey Township,

ToulaRosebrock,com

Hi Jim:

I say this all the time to agents!

When in Doubt...DISCLOSE!

Jul 05, 2009 06:17 AM #11
Ambassador
1,348,709
Silvia Dukes PA, REALTOR
Tropic Shores Realty - Ich spreche Deutsch! - Spring Hill, FL
Florida Waterfront and Country Club Living

Jim, interesting background information.  Disclosure is the best insurance policy! And less expensive

Jul 05, 2009 09:16 AM #12
Rainmaker
414,761
Betina Foreman
512-771-6318 Austin Home Girls Realty - Austin, TX
Realtor, C.N.E. Selling Homes in Lake Travis & Central Austin!

I agree 100%, disclose, disclose, disclose. Better to say too much than not enough. Good job!

;0

 

Jul 05, 2009 12:21 PM #13
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Rainmaker
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Jim Frimmer

Realtor & CDPE, Mission Valley specialist
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