Open-Door Policy Protects Home Buyer

The old legal standard “let the buyer beware” doesn’t apply when you’re selling your house. You have a legal duty under California law to tell the buyer what you know. If the roof leaks, the air conditioner doesn’t work or the add-on bedroom wasn’t built with permits or up to code, you can’t hide or disguise the facts.

In fact, for almost two years now, a statutory disclosure form has been required in California for real estate transactions involving one to four dwelling units. The form includes a laundry list of housing essentials, appliances and extras, from central heating units to intercoms, garbage disposals and water softeners. The seller must indicate whether the home has such items and whether they are in good operating condition.

In addition, the seller has to answer written questions on the form about soil problems, zoning violations, landslide damage, drainage problems and even neighborhood noise or other nuisances. If you are listing your home for sale by a real estate agent, the agent must make a “reasonably competent and diligent visual inspection of the accessible areas of the property” and also sign the disclosure statement.

(You can obtain a copy of the form at your local real estate agent’s office. If you’re “selling by owner,” you’ll find it reprinted, along with a helpful explanation, in the book “For Sale by Owner” by George Devine. It also appears in Civil Code Section 1102, which you can find at a local law library.)

When you enter into a contract to sell the property, the buyer must acknowledge in writing that he or she received the disclosure statement. That contract clause will be very helpful years later if the buyer conveniently forgets any of the problems listed on the form.

You only have to reveal what you know, or what you reasonably should know, based on reasonable efforts. In other words, you don’t have to hire a geologist to find out if your beach house is slipping into the ocean, but once you learn that it is, you’ll have to disclose that fact. (Whoever said ignorance is bliss may be right when it comes to selling real estate.)

And you do have to complete the form honestly and in good faith. When you don’t know something precisely, the law allows you to provide a “reasonable approximation” if you identify it as such.

It’s best to give the disclosure statement promptly to anyone who looks like a possible serious buyer. If you hand it over after the offer is made, the buyer has three days to renege and get out of the deal (five days if you mailed the statement).

If the disclosure form isn’t used, or contains fraudulent information or incorrect data that was negligently provided, that doesn’t mean the sale will be invalidated. But the buyer will have the right to sue you for actual damages suffered as a result. (For example, the cost of replacing the leaky roof that you forgot to mention.)

Besides the information on the form, you have a duty to reveal all other material facts about the house. And that requirement has been stretched to the legal limit. In a 1983 case, a seller and her real estate agent were held accountable for not revealing that the house was once the site of a multiple murder.

As the court noted, quoting Shakespeare, “truth will come to light; murder cannot be hid long.” But I wonder if that’s true of a leaky faucet.

Legal Brief

My column on Jan. 19 described a new prepaid plan that offers legal services to small business for a modest monthly fee. Thomas E. Stindt, a Woodland Hills business lawyer and regular reader of this column, notes that such plans aren’t for everybody.

“They aren’t necessarily the best alternative for all small-business owners, because many individuals need counsel perhaps only twice a year, and even at an average hourly rate, their total fees might be less than the aggregate of premiums for a year,” he writes. “There is something to be said for selecting an established practitioner in the business owner’s local community with references and known credentials, with whom the business person can form a regular and ongoing relationship.”

Klein cannot answer mail personally but will respond in this column to questions of general interest about the law. Write to Jeffrey S. Klein, Legal VIEW, The Times, Times Mirror Square, Los Angeles 90053.