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Handling Nondisclosure Disputes: An Interview with David B. Stromberg of Stromberg Law Firm

By David B. Stromberg

Please tell us a little bit about your firm and the areas of law that you practice.

I have been an attorney since 1979 and formerly was the head of the litigation practice group for a medium-sized law firm. I formed my firm in 1998. It principally practices real estate law, construction-related disputes, and business (litigation and transactional) and corporate law (the latter including the formation of corporations and LLCs, statutory compliance, etc.). In addition, I have been a mediator for 20 years, helping small businesses and individuals resolve their legal differences.

What's the first thing that a new homeowner should know about possible litigation for a nondisclosure dispute?

Every California purchase and sale agreement requires the buyer and seller first to mediate any dispute, especially nondisclosure disputes, before proceeding with litigation or arbitration. It is critical for a buyer who believes that the seller failed to disclose some condition with the property to consider whether the condition wasn't discussed or referenced at all, or whether the buyer failed to appreciate the significance of what the seller discussed or referenced. In other words, did something that the seller mentioned put the buyer on a duty to inquire further about it.

What are some of the most common failures to disclose that you've seen arise with homeowners in Northern California?

One of the most significant areas of dispute with nondisclosure issues is, how far attenuated does an issue have to be before the seller no longer has to disclose it. For example, the seller had issues with settlement with the house and had a licensed contractor make repairs. If the repairs were made the previous year, there is no dispute that the seller would have to disclose the settlement and the work done. But what if the repairs were made 10 years ago and no further problems were experienced; does the seller still have to disclose the settlement and the work done? What about 20 years? The issue of whether a seller has to make a disclosure of some condition that occurred well in the past remains in dispute, but I always encourage a seller to make as comprehensive a disclosure as possible and then put the responsibility on the buyer to conduct its own investigation.

Can you briefly describe the basic rights that homeowners have when it comes to issues with a seller?

If the mediation proves unsuccessful in resolving the dispute, a buyer who believes that a seller has committed fraud by not disclosing a particular condition with the property can sue to rescind the contract and give the house back although this is a difficult remedy to pursue because the seller has undoubtedly reinvested the net proceeds in another house or otherwise may not have the money any longer to return to the buyer. The buyer can also sue for breach of contract (the one remedy that would enable the buyer to recover attorney's fees) or fraud (nondisclosure or concealment of a material fact).

When should a homeowner who is having problems with their newly purchased home consult a lawyer?

I recommend that a buyer who believes that the seller breached the contract in some way or failed to disclose a material condition is well advised to consult with an attorney as soon as possible. Not because I think a buyer should be litigious. An attorney can analyze the situation and counsel the buyer as to whether the problem lies solely with the seller or perhaps with the buyer's real estate broker, or even with the seller's real estate broker, or one of the contractors that the buyer employed to investigate the condition of the house before close of escrow. If the buyer first approaches its broker, the licensee may not be as well equipped to evaluate the situation from a legal perspective, or may want to protect himself/herself. A consultation often doesn't cost the buyer anything. My firm provides a free initial consultation.

Do you have any advice to help people settle nondisclosure issues as quickly as possible?

Yes, the only sane way to resolve disputes in the real estate or business contexts is through mediation. Litigation is ridiculously expensive. Arbitration has serious significant drawbacks that make it a poor alternative. In a mediation, the parties learn to work collaboratively to resolve their own dispute, rather than having some third party tell them what the result will be.

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