Legal Question in Real Estate Law in California

There is a real estate transfer disclosure form specified in the Civil Code (see Section 1102.6). In Section II(A) of the form, there is a checklist of items. One of them is "septic tank." Is it checked?

Note the the form also has a reference to a three-day right of rescission after the disclosure statement is delivered, which is contained in Civil Code section 1102.3. This right of rescission will have expired, but it is not to be confused with any right to rescind your purchase which you may have as a result of the seller's fraud.

OK, those were preliminary comments. The meat of the discussion here must address two issues: (1) Whether there has been a misrepresentation, and if so, is it negligent or fraudulent? and (2) Have you sustained any legally-cognizable harm as a result thereof?

First, I'd say if "septic tank" was checked on the disclosure form handed you by the broker, you'll have a hard time proving an actual misrepresentation, even if some advertisment or MLS listing said the property was on sewer. The broker can correct an earlier mistake.

As to the damages issue, you must plead and prove some monetary loss or detriment to you caused by the broker's misrepresentation in order to be entitled to a remedy. The mere fact that the broker represented that the house had A, B and C when in fact it had X, Y and Z is not sufficient, by itself. You'll need to show harm of some kind, and since a septic system is an accepted alternative to a sewer connection, this may require some creativity.

As to remedies, if you can show negligent misrepresentation you will probably be limited to money damages - the benefit of the bargain. If the fact that the house is on septic rather than sewer can be shown to reduce its value by $10,000, that's what you may get.

On the other hand, if it were an intentional misrepresentation, i.e., fraud, I believe you would have a choice of remedies......money damages or rescission, but not both. You could also ask for punitive damages (but you are not permitted to ask for a particular sum as punitive damages - that's up to the judge or jury.

I hope you will be able to settle this out of court, because unless you can show more damages than I think likely, the case may not net you much, if anything.

I hope you will be able

The last sentence of my answer was supposed to read "I hope you will be able to settle this out-of-court, because the provable damages probably won't cover the cost of litigation."

Afterthoughts: Re exculpatory clauses in the contract: No one can contract away his or her liability for his or her own fraud. Civil Code section 1668. Also-- when going through your deal documentation, look for and consider the effect of either (a) an arbitration clause, or (b) an attorney-fee clause.