The doctrine of caveat emptor, which means “let the buyer beware,” has long been one of the most important principles of contract law, but legislators in California have carved out an exemption for real estate transactions that requires property sellers and their agents to disclose material defects to prospective buyers. A material defect is a factor that would make the property less desirable or valuable. Most material defects are property issues like cracked foundations or environmental hazards, but sellers are also required to reveal neighborhood nuisances like unpleasant odors from a nearby factory or persistent noise from an area airport.
Deaths on the property
In many parts of the country, property sellers are only required to disclose deaths that were caused by an act of violence, but California law states that even natural deaths must be disclosed to buyers if they occurred during the previous three years. HIV-related deaths do not have to be disclosed because AIDS is considered a disability under federal law, which means people suffering from the disease are a protected class. The real estate law in California does not make an exception for mass killings or murders that attracted widespread media attention, which means property owners are not required to disclose them if they took place more than three years ago and the buyer does not ask. However, it would probably be wise not to conceal this information.
Foreclosed properties
The law in California does make an exception for lenders that sell properties they have foreclosed on. This is because lawmakers considered it unreasonable to expect a bank to be aware of material defects. Disclosures are also not required when the buyer and seller are married or closely related.
Civil remedies
When property sellers or their agents do not disclose material defects, buyers may pursue civil remedies through arbitration or by filing lawsuits. In these situations, the damages sought are usually the costs of making repairs or the difference between the purchase price of the property and what the buyer would have paid if they knew about the material defect or defects.
