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What is failure to disclose in commercial real estate?

On Behalf of | Mar 27, 2020 | Commercial Real Estate |

California state law requires real estate sellers to make certain disclosures to potential buyers. If you purchase commercial real estate and something goes wrong with the building, you may have a case for legal damages.

Familiarize yourself with the mandatory California real estate disclosures for commercial properties.

Disclosure for commercial and industrial properties

In California, the guidelines for industrial and commercial disclosures also apply to vacant land. Required disclosures for these property types include but are not limited to:

  • Whether it is advisable for the buyer to obtain title insurance
  • Whether the property’s location is within a flood zone or earthquake zone
  • Whether any deaths have occurred on the property within the past three years
  • Flood disaster insurance requirements for the property
  • Comprehensive groundwater basin information
  • Whether hazardous material release has occurred on the property
  • Whether the property has ever housed a methamphetamine laboratory
  • Whether the property is in a state responsibility fire hazard area
  • The condition of the property’s structures and systems

Liability for failure to disclose

You cannot sue the seller for failure to disclose a property defect unless you had a property inspection before completing the purchase. When you had a home inspection but the inspector did not detect hidden defects that the seller knowingly concealed, you can file a legal claim for specific damages. These include:

  • Compensatory damages that cover the property value decrease resulting from the defect and the buyer’s personal cost to fix the defect
  • Punitive damages when the buyer can prove that the seller or seller’s real estate agent acted maliciously to conceal a serious issue with the property

Rarely, California courts may rescind the purchase contract. The seller must return your money in exchange for the defective property.

As with other types of fraud, you have three years to sue for failure to disclose commercial real estate defects in California. For this reason, you must act quickly when you discover an issue that impacts the value of a recently purchased property.