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So you’re selling your house and it’s time to fill out the Transfer Disclosure Statement (“TDS”) required under California Civil Code section 1102 et seq. Your real estate agent should assist you in racking your brain, and searching your files, for any issues you experienced that could possibly fall within the questions asked in the TDS.

It’s not in your economic interest to paper over any issues. Paper them instead! Fill out the TDS like you’d want to read it again five or ten years—because you might have to when your buyer sues you for failure to disclose and all you can remember is a raft of boxes checked “no.”

If you get sued, you have a few ways to defend. First, perhaps the offending issue was obvious to the naked eye. The general rule here is that the purchaser is permitted to rely upon material factual representations affirmatively made as true by or on behalf of a seller only if the facts are normally not within the purchaser’s knowledge but are reasonably within the knowledge of the seller. If the buyer had as much information as the seller, then this information put them on notice to study the property’s history of construction and permitting. The buyers could have and should have satisfied themselves of the issues they now complain of.  

Second, perhaps all those “no” checks were accurate at the time the disclosures were made. The TDS law (Cal. Civ. Code § 1102.5) states:

       (a) If information disclosed in accordance with this article is subsequently rendered inaccurate as a result of any act, occurrence, or agreement subsequent to the delivery of the required disclosures, any inaccuracy resulting therefrom does not constitute a violation of this article.

 Third, TDS may have been reasonable and justified. The TDS law (Cal. Civ. Code § 1102.4) states:

(a) Neither the seller nor any seller’s agent or buyer’s agent shall be liable for any error, inaccuracy, or omission of any information delivered pursuant to this article if the error, inaccuracy, or omission was not within the personal knowledge of the seller or that listing or buyer’s agent, was based on information timely provided by public agencies or by other persons providing information as specified in subdivision (c) that is required to be disclosed pursuant to this article, and ordinary care was exercised in obtaining and transmitting it.

Fourth, and most importantly, the statutes of limitations expires two years after the sale if buyer is suing for fraud, and four years after the sale if buyer is suing for breach of contract. As stated in Parsons v. Tickner (1995) 31 Cal. App. 4th 1513, 1525, “When the plaintiff has notice or information of circumstances to put a reasonable person on inquiry, or has the opportunity to obtain knowledge from sources open to [her] investigation (such as public records or corporation books), the statute commences to run.” (citing 3 Witkin, Cal.Procedure (3d ed. 1985) Actions, § 454, pp. 484–485.) If buyers were on notice to check the property’s history, and did not do so, they haven’t acted with reasonable diligence to protect their interests.

By: Kathleen J. Smith

About the Author
Theodore J. Schneider practices in the areas of business and corporate transactions, employment law counseling, municipal and public law, real estate and land use, and homeowner associations. Ted began his legal career in 2002 when he joined the Los Angeles office of Gibson, Dunn & Crutcher, L.L.P. before relocating to Ventura County to join his father in practice.