Real Estate Purchase, Failure to Disclose…No Harm, No Foul?

California is home to over 35,000,000 people. With all those real estate transactions happening in the State, it has become common for an allegation of a “failure to disclose” to arise after escrow has closed on a residential sale (e.g. condo or single family residence). This article does not address any failures to disclose in commercial transactions.

What should you do if you believe a Seller has “failed to disclose” a material item?

California courts have answered this question by empowering a the Buyer with a common sense choice, called an “election of remedies” — the Buyer can (1) file a Complaint for Rescission or (2) Affirm the Contract and Sue for Damages. In English, Option 1 means that a Buyer can ask a Court to order the Seller to take the property back and repay the Buyer (with certain credits and offsets for the time period the property was owned by the Buyer), such that both parties are returned to their prior positions before the sale. Option 2, means that a Buyer can simply elect to keep the property and sue the Seller for damages (i.e. money). (The calculation of damages will be the subject of another post).

Liability v. Damages

The law makes a fundamental distinction between liability and damages. Liability means that a party is legally responsible for the “damages” caused by his wrongful act (i.e. he/she broke the law). Damages is a legal attempt to quantify the harm so that a Court can order the party liable to pay money.

In some failure to disclose cases, there may be liability but no damages, and in such cases the Courts want the parties to move on with their lives, even where one party clearly failed to disclose something that they should have disclosed. In such cases, the rule boils down to “no harm, no foul” (or “he / she lied, but so what”).

In other failure to disclose cases, there can often be SUBSTANTIAL AMOUNTS of money at stake, climbing into the HUNDREDS OF THOUSANDS or even MILLIONS!

About Adishian Law Group, P.C.

Adishian Law Group is a California law firm with a statewide practice in the areas of Corporate law, Employment law, Real Estate law and Mediation Services. Adishianlaw.com is one of the oldest continually operating law firm websites on the Internet. The firm serves its clientele via three offices located in the major business hubs of El Segundo, Palo Alto and San Francisco. As of March 2013, Adishian Law Group, P.C. has represented individual and corporate clients located across 20 California counties, 4 States outside of California and 9 foreign countries — in over 340 legal matters.

For more information about this topic or to speak with Chris Adishian:

Telephone: 310.726.0888 | 650.646.4022 | 415.955.0888
Email: askalg@adishianlaw.com
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