Legal Question in Real Estate Law in California

Re: Short Sale of Home - Waiver of CA Civil Code 1542

A waiver of California Civil Code Sec. 1542 is a standard provision in many settlement agreements. Not to say that you should agree to it, but it is frequently used by attorneys when a compromise is reached between parties. In effect, California Civil Code Section 1542 provides that a release of claims (think settlement agreement) does not extend to claims not known at the time it is entered into. A waiver of Sec. 1542, as your lender is requesting, means that you are in fact waiving not only any claims you may know you have against your lender, but you are also waiving any claims which you may not know about at this time. It effectively closes the door to your suing your lender at any time in the future. They believe that because they are allowing you to pay less than what is owed, in return for that you are going to waive any and all claims you may now, or in the future become aware of as to this lender. You need to decide if this is a fair trade, but I can tell you that they will not accept your short sale offer without this waiver.

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