Legal Question in Real Estate Law in California

There is no question that if defects affecting your unit had resulted in past repairs, that should have been disclosed. The law is pretty clear that a seller cannot say a structural problem is not material because it's been fixed. The buyer has the right to know about and decide whether to investigate or inspect the repairs.

As for the litigation, however, that's actually a really tough question. Past litigation is not part of the statutory disclosure list. Courts have ruled, however, that the statutory list is not exhaustive of the disclosure requirements. Anything that "materially affects the value or desirability of the property" must be disclosed. The problem is determining whether the past litigation was a matter that would affect the value or desirability of the property. The standard is objective, not your subjective opinion, especially not in 20/20 hindsight after it becomes part of a problem. Would an average reasonable buyer consider that past litigation to be a material issue affecting the value of the property, is the question.

The only legal guidance we have on this is a fairly recent case (2009) in which a seller disclosed past flooding and repairs, but failed to disclose that the repairs had been done after two lawsuits. The defendants moved for summary judgment and the trial court ruled that since the repairs were disclosed, giving the buyers the opportunity to investigate and inspect to see if the repairs were adequate, the fact that they were done as part of a lawsuit was not relevant and need not have been disclosed. The court of appeals reversed, and ruled that whether the litigation was material to the value of the property was a disputed issue of fact. Therefore it could not be decided on summary judgment.

Unfortunately, because this was a summary judgment case, all that tells us is that past litigation MAY have to be disclosed. It does not tell us that it is material in every case, or even when it is or is not material. We only know that whether or not it is material is a factual issue, meaning it depends on the facts of each case. So for sellers listing their property for sale, the lesson is: always disclose past litigation so you don't have to go to a jury to decide if it was material in your case. For you, as a buyer, post transaction, however, it would require a full review of the facts to determine whether there is a good case that the past litigation was material at the time of the purchase.