Under California law, sellers of both attached and detached homes must disclose to the buyer all conditions, including construction defects, that would affect the buyer's decision to purchase or not purchase, or to pay a higher or lower price for the property. The requirement to disclose is based upon what the seller knew or reasonably should have known about the conditions of the property being sold. Thus, the legal duty to disclose is extremely broad.

With a few exceptions, in California residential real estate transactions, the sellers are required to sign a Transfer Disclosure Statement (TDS), stating in writing, all of the defects of the property and other specific existing conditions designed to permit the buyer to make a fully informed decision.

The failure of a seller to make the required legal disclosure can result in the buyer making a claim for nondisclosure. This will generally include a claim for negligent misrepresentation, intentional misrepresentation, or possibly fraud. If a buyer makes such a claim, and prevails in court, the defendant sellers will be liable for damages which may include:

• The cost to make the needed repairs;
• Compensation for loss of use; and
• Costs of litigation including court costs, jury fees, court reporter fees and expert witness fees.

In addition, a seller defendant may be required to reimburse the buyer for his or her attorneys fees, and in the case of fraud, may be liable for substantial punitive damages.

As you can see, non-disclosure residential real estate claims are serious claims. The failure to disclose a $10,000 defect can result in a claim, that if unresolved, could result in a judgment exceeding ten times the cost of the repair. Consequently, sellers should make full and complete disclosures to potential buyers.