Legal Question in Real Estate Law in California

Re: Non-disclosure of management company

The following is a direct cut-and-paste from the case named at the end of the squib:

"Where, as here, the seller is charged with the responsibility of disclosing information to a purchaser, no public interest would be served by imposing the same disclosure requirements on a homeowner's association. We reject the argument that Paseo had a duty to monitor the seller's disclosures or volunteer information about construction defects. Equally without merit is the argument that Paseo had a duty to disclose information concerning its suit against the developer. Such a disclosure may have prejudiced Paseo's position in the litigation and resulted in the dissemination of confidential information that encompassed attorney-client and work product matters.

Applying the factors set forth in Rowland v. Christian, supra, 69 Cal.2d 108, 70 Cal.Rptr. 97, 443 P.2d 561, we hold that no public policy would be served by requiring a homeowners association to disclose construction defects to a prospective purchaser. Such a disclosure requirement would impose an unreasonable burden on Paseo and require it to incur substantial costs to assemble the information, make a timely disclosure, and monitor all potential sales in the common interest development. The insurance costs would be enormous and subject it to a host of claims by disgruntled purchasers. Those costs would be passed on to Paseo's members, undermine the fiduciary duties owed by Paseo's board of directors, and subject Paseo to new theories of liability. " '[T]he traditional rule [is] that directors are not personally liable to third persons for negligence amounting merely to a breach of duty the officer owes to the corporation alone.' [Citation.]" (Self-Insurers' Security Fund v. ESIS, Inc. (1988) 204 Cal.App.3d 1148, 1162, 251 Cal.Rptr. 693.)

Case: Kovich v. Paseo Del Mar Homeowners' Assn.

Excerpt from: 41 Cal.App.4th 863, *869, 48 Cal.Rptr.2d 758, **762"

I have not read the entire Kovich case, but you might want to look it up at a local library, or perhaps it is on line.