Legal Question in Real Estate Law in California

Re: Condo lawsuits

A general recommendation would be to take a real estate agent training class, one designed to prepare you to take the agents' exam. Whether you actually apply for a license or not, the training will be useful; for example, in your proposed activity, you'll have to read and understand dozens of contracts, offers, CC&Rs, disclosures, applications, etc., most of which you'd be much better prepared to handle with some formal training.

As to lawsuits, they can perhaps be divided into two categories: those affecting title or possession; and those affecting only persons such as owners, agents, tenants, etc. Generally the former would be discovered through finding a recorded Notice of Pendency of Action (a "lis pendens") against the property. This should show up on a title report. There is no perfect way to find out about the second type, but to the extent you might be affected, the suit should be disclosed by the seller or agent.

Protection from suits both before and after you buy can be handled through insurance, use of a limited liability company (or corporation), or both; contact an insurance agent for the former and a lawyer for the latter.

Home owner insurance coverage for liability suits varies from policy to policy and usually isn't suitable for investment properties or landlord-tenant situations. There are special policies for landlords, and that's what you should shop for and buy.

Asking what a toxic mold suit could cost is like asking "how long is a piece of string?" Suits could end up with judgment for defendant, or judgment for plaintiff with zillions of dollars damage. I read least week about a $1.3 million judgment in a nearby county to me.

I think overall your business risk is a greater concern than your legal liability risk; the latter can be dealt with through insurance and use of LLCs (plus some common sense). It's more difficult to achieve positive cash flow in today's market, and even long-term capital gains may be questionable due to the current market and low affordability of housing.

Re: Condo lawsuits

You can ask the homeowner about previous lawsuits. Also, you can get a "condo certification." This is a document for lenders that the management company fills out (for a fee) for the homeowner's association. The document has a section for litigation.

Insurance policies will NOT cover mold. You can do your best to limit liability in your rental agreement.

You should form an LLC and hold title to the properties in its name. This will provide limited liability for you. We form LLC's and provide business counseling to many real estate clients. Feel free to give us a call.