HOA is in early stages of filing a claim against the builder but has not entered any type of litigation or lawsuit. Does this need to be disclosed?

Asked by pewpewpew, Boulder, CO Tue Jun 11, 2013

I'm currently in process of selling my condo. The HOA has hired a firm to look into filing a claim against the builder. Since there is no legal action currently involved, does this have to be disclosed to the buyer?

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Alina Aeby’s answer
Alina Aeby, Agent, San Francisco, CA
Wed Jun 12, 2013
You rather over disclose and prevent any objections.

Facts:

-if the discussion about filing a claim happened, most likely there is a case against the builder and a legal action will start soon. The chances are the discussions are reflected in the HOA Board Minutes and that is a document that MUST be presented to the buyers;

-since the discussion took place, you will have to disclose any problems with the building, even if there is nothing wrong with your condo;

-think about it: a buyer can find out more about the building anyway from the neighbors, HOA Board and management company . That is what I advise my clients to do all the time.

-even if you are correctly checking the box in the disclosures that the building ' is NOT' involved in any litigation, if that is starting while the buyer tries to get a loan, it's OVER. The loan could be declined and your property will be back on the market.

You know it, therefore you can't hide it.

Good luck!

Alina

Alina Aeby- Broker Associate
Pacific Union/Christie's International Real Estate
http://www.bestsfhomes.com
415.744.4844
1 vote
Eric Castong…, Agent, San Francisco, CA
Thu Jul 18, 2013
If you were buying it, would you want to know?

It will get disclosed when the HOA fills out the condo certification for the buyer's lender anyway.

Best
Eric Castongia
BRE No. 01188380
Zephyr Real Estate
1 vote
Sally Rosenm…, Agent, San Francisco, CA
Tue Jun 11, 2013
YES! Disregard anyone who tells you no, not really or maybe. The clear and simple answer is yes. This is a material fact. If your condo complex loses and owes the developer money, you could be sued by the new buyer to pay his/her bill and maybe for "distress and damages" as well. If you don't believe me, contact a lawyer who specializes in real estate right away!

Good luck!
Sally
Web Reference:  http://www.sallyrosenman.com
1 vote
Roh Habibi, Agent, San Francisco, CA
Sun May 25, 2014
Good rule of thumb is to disclose disclose disclose everything and anything. Buyers are happier to learn of everything before the purchase and have time to come to terms with the product vs. finding out from a neighbor down the road and filing for a lawsuit !
0 votes
Kevin and Ju…, Agent, Wildomar, CA
Wed Nov 20, 2013
When in doubt, disclose. You are always better off over-disclosing rather than under-disclosing.
0 votes
Paul Warrin, Agent, San Francisco, CA
Tue Nov 19, 2013
Your best choice is always to disclose. Being upfront with issues such as litigation will protect you from any unwanted situations with a potential buyer. Buyers want, and deserve, to know what they are getting themselves into when purchasing a property. Some may say that it is not necessary to disclose this type of information, but it is definitely the best way to go.
0 votes
, ,
Mon Oct 14, 2013
These days it seems like there is always someone who will say NO, but as you can see by reading all of these ethically minded posts, there really shouldn't be a question here about Yes or No, as opposed to what. When it comes to what, that's a legal Q.

Some HOA's will withhold details from their own members out of fear that they will damage property values, rather than focusing on finding the truth, and repairing the damages correctly.

I live in a HOA where many people received and possibly took bad advice, and therefore many
sales just pre and post litigation were not done with full disclosure. Property values didn't drop
until the markets tanked in 2008-2009, but once they dropped, and the true extent of construction
damages could no longer be hidden, our values stayed about 50% down and still have not fully
recovered. Rather than creating a flood of lawsuits, it seems most people just rolled with it.
Likely because they understood how painful and expensive lawsuits are.

My advice: condos are not all bad, but if money means anything to you, keep in mind that you'll
likely end up having a bunch of strangers who are amatuers deciding how to spend your money
on maintenance and repairs.

You can't always find the home you want, and condos aren't a guaranteed nightmare, but there's
more than one reason why most people value SFHs more.

Brisbane/S.F., CA
0 votes
Dea Kelly, Home Buyer, Rockwall, TX
Thu Sep 5, 2013
My thought is always if you are asking if you should disclose, you should disclose.
0 votes
The Stephen…, Agent, Portland, OR
Thu Sep 5, 2013
I'm facing a similar situation here in Portland. In my opinion: disclose! If you have knowledge of this and then things go south after the property sells - there is a good chance they'd come after you if you don't disclose.
0 votes
Ryan Rudnick, Agent, San Francisco, CA
Thu Sep 5, 2013
It's always best to err on the side of caution when it comes to Disclosures. If you have any information at all that could effect a buyer's interest in a home, you should let your agent know, and it should be listed somewhere in your disclosure packet.

Hope this helps!

-Ryan Rudnick
Downing & Co.
0 votes
, ,
Wed Sep 4, 2013
Disclose. Conventional financing is available for condos with pending HOA litigation with 20% down.
0 votes
Terry Bell, Agent, Santa Rosa, CA
Fri Jul 19, 2013
There may not be a lawsuit yet, but if you have knowledge of an issue pertaining to the construction of the units, that is what I would recommend that you need to disclose. You don't say why they are thinking of filing a claim against the HOA. I would discuss it with your agent for the proper way to fill out your disclosures.
0 votes
John Oldfield, Agent, San Francisco, CA
Tue Jun 11, 2013
I agree with Sally --in California all material facts known by the seller that could affect the value of the property need to be disclosed. In addition, the HOA docs the seller is required to provided to the prospective buyer would contain some reference to this in the meeting minutes or other documents. Best rule of thumb -- if you find yourself asking whether something should be disclosed, the answer is almost certainly yes. This protects you as the seller from a subsequent lawsuit.
0 votes
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