For Attorneys
Considerations when sending an initial demand letter for mediation
Why you should strongly consider serving a comprehensive brief/demand well in advance of a mediation
Why confidential briefs rob you of a chance to educate the other party
Gathering information to settle a case when you have not conducted discovery yet
Assessing a failure to disclose claim - buyer and seller
Important elements of an effective failure to disclose brief - buyer
Important elements of an effective failure to disclose brief - seller
Civil Code § 3343 / The Out of Pocket Rule (buyer/seller)
Civil Code §3333 and §1709 / The Benefit of the Bargain Rule (fiduciary/realtor fraud)
Preparing your buyer client to sign a 1542 waiver -
home inspections once a claim arises
Considerations when sending an initial demand letter for mediation
Practicing law is a delicate combination of art and science. It is also a business. There are approximately 1,327,000 attorneys in the United States engaging in this business. Attorneys are not only in the business of advocating for clients but also having to sell prospective clients on why we are the ones to do that advocating for them. We are practitioners, business people and sales people. That’s a lot of things to juggle. No wonder why attorneys have a higher incidence of substance abuse, mental health struggles and burnout than the general population. It can be a tough career choice.
Prospective clients are not in a rush to hire attorneys who tell them at the outset that their case is weak, has numerous challenges or will be an uphill battle. Most if not all clients want to hear one thing and one thing only: that their attorney will fight and fight hard for them. As a result, we sometimes take on the strong emotions of the client in an effort to show that we are fighting hard for them. As a result, we send initial demand letters mimicking the angry tone of our clients, accusations and all.
This strategy can backfire and actually cost clients money, a lot of it. In mediations, I sometimes spend a good amount of time peeling parties down off the ceiling who have received initial fire and brimstone demand letters. In particular, parties who have been accused of fraud or called a liar are often very upset and they can only focus on that. People accused of fraud or who are called a liar go into fight mode. Fight mode costs time and money. People in fight mode cannot think straight.
Consider this: You can advocate without alienating.
Consider sending initial demand letters that actually give the other party a way to save face and settle a case early on and without a ton of fanfare. For example, in failure to disclose cases in the sale of real property, consider assuming that an alleged failure to disclose a material fact about a property was a mistake and not an intentional misrepresentation. People can relate to mistakes. Everyone makes mistakes. I probably make three a day and that is before I have even had my morning espresso. People cannot relate to being accused of fraud, even if they happened to have committed it. People are much more willing to cop to and correct mistakes. They are not willing to back down quickly from being called a liar, crook, fraud or immoral.
When sending an initial demand letter for mediation in a failure to disclose case, consider this general approach:
Dear Seller:
We have been retained by Ernie and Bert who purchased your home on January 21, 2022. After the close of escrow, our clients discovered a number of conditions of your former home that were not disclosed to them in the disclosure documents nor that were identified in any of the inspection reports that you provided them in the course of the sale. We understand that you completed many documents in preparation for the sale and that you owned the home for many years. Sometimes sellers make mistakes in preparing the documents or are not well advised by their realtors in how to complete the disclosures thoroughly and accurately. Sometimes sellers forget about certain conditions of a property. Unless and until we learn otherwise, we are moving forward with the belief that mistakes were made and we are reaching out to remedy those mistakes.
Thankfully, we have a way to shortcut dealing with these issues as mediation is required before taking any legal action to resolve this matter. To that end, please review the attached [photos, bids, estimates, invoices, etc.,.] regarding the undisclosed conditions. We are happy to further elaborate on the undisclosed issues with your attorney once you retain them.
Does this make an attorney look weak? No. Does it signal to your client that you are not taking a hard stance from the outset? No. If you properly and honestly advise your clients about their particular case at the outset, explain how litigation works, and why taking this approach actually keeps everyone level-headed throughout the process, you will appear to be an honest and competent attorney. And, you will likely start the case off in a way that leads to a cooperative relationship with your opposing counsel. Cooperative and respectful relationships between counsel are more cost effective (and keep attorneys out of the bar at 2pm).
If your client thinks you are being too soft to start, perhaps that is not the client for you. If you have properly and realistically advised your client and they still want you to punch the opposing party in the face to start, you had better ask for a very large retainer fee, because punches come with punches back. Encourage humility and reasonableness from the start.
Am I encouraging you to be a pushover?
No.
I am suggesting you consider toning it down a touch at the outset?
100% Yes.
Get tough only when someone gives you a reason to be. That reason cannot be that your client is fuming over something. Many times those fumes are based on speculation and conjecture.
Why you should strongly consider serving a comprehensive brief/demand well in advance of a mediation (notwithstanding the brief due date) if there is an insurance company in the mix
It is not uncommon for a plaintiff to sue or make claims against a defendant where that defendant may have an insurance policy that covers some or all of the damages being alleged. Generally speaking, an insurance policy may (a) provide a defense to a defendant under what is known as a “duty to defend” provision in the policy or (b) cover claims (pay for damages) on behalf of that defendant, or both.
Insurance companies are often behemoth organizations that need time and information to process and assess claims. All too often, attorneys bringing claims against a defendant wait until the week before a mediation to send a brief that contains information (a monetary demand, evidence of liability, damage calculations, supporting documentation) regarding liability and the damages in the case. That same plaintiff shows up to mediation a week later and is furious that the defendant is not ready or able to settle the case.
Fact:
An insurance company cannot assess or process a claim in a week.
When a claim is made to an insurance company, the claim is assigned to a claims representation or an adjuster who is tasked with first determining if there is coverage for the claim and if so, what the exposure is on the case. The adjuster will issue a reservation of rights letter informing the insured about what may be covered or not. The adjuster needs information to make this determination. If you are a plaintiff, you want the insurance company to make the determination that there is coverage because it is generally speaking easier to resolve a claim when there is an insurance company involved. I have a friend who is an adjuster. At any given moment they have over 100 files on their desk. Do you have over 100 files on your desk? If you do, how is that working for you? Imagine how that is working for them.
Help the insurance company make that determination. It only benefits your client.
For an adjuster to make this determination, you need to provide the defendant with as much information as possible, as early as possible, supporting your claims. This includes evidence regarding liability and damages, both. This includes documents, photos, reports, estimates and invoices. You can start this process by sending an initial demand letter with sufficient information to get the process started with the insurance company. Make it clear in your demand letter that you want the defendant to tender the claim to their insurance company. Once you start the mediation process, which you should do early on, then you can get a brief or additional information to the defendant so that they can forward it to the carrier under the guises of the mediation confidentiality privilege.
Once the insurance company has the information it needs, it will assess the matter and often assign counsel to defend its insured, the defendant. That attorney will need to assess the case and prepare it for mediation. This process can take up to a month to six weeks. If you wait to send comprehensive information to the opposing counsel a week before the mediation, you can safely assume that the adjuster will have very little if any money reserved to settle the claim. You will be wasting your time, your client’s money and you may lose a good opportunity to settle a case early and cost effectively. You will also leave the adjuster / insurance counsel that you do not know what you are doing.
Bottom line: get thorough information regarding liability and damages to the other side as soon as possible. This means, you will need to work your case up in advance. I know, it isn’t always easy to do this where you are required to mediate before you litigate but you will need to try. There are many ways to gather information, pre-discovery. See: Gathering information to settle a case when you have not conducted discovery yet.
There is no helpful “gotcha!” element in sending a late brief or withholding key evidence in a mediation
When I first started practicing law almost two decades ago, I was taught to hold my cards close to my chest. Lawyers were more often than not schooled to withhold information from their opposing party for fear of tipping them off which may compromise one’s position. Anyone who has ever watched any episode of any crime or law drama on tv can’t help but wait for that “gotcha” moment when a lawyer pulls out some juicy piece of evidence to an unsuspecting witness on the stand while the jury gasps in surprise. Key up that “dum dum” track from Law and Order…
Hey Counsel:
That strategy is so 1989.
Lawyers know that over 97% of civil cases never see the inside of a courtroom or a jury. Cases settle (as they should) however when a case settles can be the difference between bankrupting a client during the process or not.
There are but a few instances in a lawsuit where you can gather everyone involved to try to resolve a case; a mediation and a settlement conference. The settlement conference is a last ditch effort to settle a case once you are more often than not, only 30 days out from trial. By that time, you likely have spent a lot of time and money preparing the case for trial.
Mediations are held much earlier in the litigation cycle where you have the rapt attention of a mediator who will (and should) follow up until the case settles. Settlement judges are often a one-and-done chance to settle your case before trial. Settlement conference judges are more often than not sitting in a trial department themselves so you get one chance and limited time to settle your case with them. They often cannot follow up and have limited time and resources to work your case to resolution.
Thus, your better option is to maximize your chances of settling a case through mediation well in advance of having to resort to the last ditch option of the settlement conference.
To maximize your chance of settling at mediation, give thorough information, early. Prepare a comprehensive brief, including important and “gotcha!” evidence. Serve it on your opposing counsel in advance of the mediation, at least a week and even better, ten (10) days in advance. Don’t send a brief the day before a mediation. Please don’t send a brief the morning of the mediation. It suggests to the other side that you are not prepared. It suggests to the mediator that you expect them to get up at 5am to read your brief. 5am is early and for, you guessed it, the birds.
Many attorneys play the game of demanding a mutual exchange. Why? Because attorneys are afraid to be caught off guard or to take a position that they may learn later is not supported by the evidence. Attorneys hate appearing weak. They think if they force a mutual exchange, they will catch their opposing counsel off guard. The idea is not to catch the other side off guard. It is to educate and to help your opposing counsel help their client want to settle the case. The brief is not meant to browbeat someone, no matter how much your client (or you) may want the satisfaction of doing so.
If you receive a brief well in advance of the mediation that catches you off guard, how about thinking about it this way: Be grateful. Why? Because you have now learned something early enough in a case to pivot or to re-educate your client about their case. If you withhold information or get into a game where you encourage your opposing counsel to withhold information or to play games, you deprive your client and the other party of the opportunity to pivot or rethink the positions taken in the case. The stronger your evidence, the more likely your opposing party’s pivot will be towards settlement. Why hide that information? Why not deliver it earlier than later so the opposing side can have some time to digest the bad news and prepare themselves and their client and readjust their expectations.
People can rarely pivot on a dime and sending a brief to the other side 24 hours before the mediation suggests that you are unprepared and also, deprives the other party of the time to come to terms with the possibility that their case is not as good as they think. You would want and need the time to process also.
Why confidential briefs often rob you of a chance to educate the other party
We encourage you to exchange briefs and not send confidential ones to the mediator only. Why? Because if you don’t tell the other side what you want and why you want it, how are they to know? Mind reading is not something anyone is adept at doing. While we may expect our spouse to do it from time to time, it is not a viable strategy to ask your opposing counsel to do it. (Also, our spouses are not good at it either…just saying).
Instead of viewing a mediation as a sneak attack or a game of hide the ball, it may be more helpful to consider a mediation as an opportunity to educate the other side on the law and the evidence you are going to, or likely going to introduce to support your position.
It may seem counterintuitive, but use your brief to help your opposing counsel settle the case. Yes, I said you should help your opposing counsel. Help your opposing counsel educate themselves and their client. Many attorneys think that “help” and this “education” includes threats, name-calling, predictions about prevailing, wild allegations, speculation and the like. That kind of “help” and “education” feels bullying to the other side and does little to convince them to think rationally about their case. That tactic is like kicking a dog and being surprised when it bites back instead of hopping into your lap to be petted.
Instead of fire and brimstone, send a brief recitation of the facts (not guesses about them), the law and send documents, declarations, invoices, photos, videos, reports and any other evidence you may have to support your position.
Nothing speaks more than a brief that has relevant and important evidence actually cut and pasted into the body of the brief. Many people are visual learners. When they see evidence peppered directly into the narrative, it is powerful and sticks in a way that having to flip back and forth between a brief and voluminous exhibits does not.
Attorneys do not get better results when they send a 200 page brief which is two pages of substance and 198 pages of exhibits. In those 198 pages, there are likely 5-7 nuggets of very important information that get lost in translation. Pull those nuggets out and paste them into the brief directly. When you ask a jury about why it decided a case one way or another, they often point to two or three salient points that stood out them. Find those salient points and highlight them. Those points get diluted when you send hundreds of pages of exhibits, as if you are getting paid by the page to draft the brief. Some of us attorneys over the age of 40 don’t know how to use our computers. Get someone to help you if you don’t know how to get those graphics directly into your brief. It is well worth the effort.
When evidence shows up right smack in the middle of the body of a brief, you have given the mediator a solid tool to work with. A mediator can work with evidence. A mediator can move a party when there are documents that support the other party’s point of view. A mediator can help a party truly evaluate all the good reasons to settle when there is concrete evidence in front of them that may lead that party to consider ending the dispute early.
What a mediator has a hard time doing, and which takes up a lot of time and space (and therefore costs your client money) is having to explain why there is no brief for a party to consider. Also, mediators spend an inordinate amount of time pulling a party down off of the ceiling after a party does receive a brief but one where the party has been personally insulted and accused of things with little supporting evidence and mostly speculation. If I had a dime every time a plaintiff said “...they had to have known!!!” When I say “how”, I get a blank stare. Evidence on the other hand speaks for itself often and is the better way to convince someone of your position. And by the way, the standard in many cases, such as in failure to disclose material facts in the sale of real property is “knew” not should have known. Just saying.
There are of course circumstances where a party needs to communicate confidential information to a mediator. Consider communicating that information outside of the brief in an email clearly labeled “confidential” or that good ole’ thing called a telephone. Believe it or not, phones have more functionality than texting or doom-scrolling at 3am. I am always happy to communicate about those confidential matters with you. Don’t let those confidential matters deprive you of your chance to educate the other party.
Gathering information to settle a case when you have not conducted discovery yet
I sometimes hear from attorneys in advance of a mediation that the mediation “won’t go anywhere” because no one has conducted discovery yet. This happens often in matters where there is a mediation clause that requires the parties to mediate before they litigate or arbitrate such as in the California Association of Realtors purchase agreements.
While parties may not have every document or deposition they would like in preparation for a mediation, there are many avenues to gather evidence short of discovery.
In failure to disclose cases, there are many documents that can be gathered pre-litigation:
- A buyer or seller is entitled to their entire real estate file from their broker by just asking. This file should include the purchase and sale agreement and the entire disclosure packet the buyer or seller signed. These files are stored electronically by brokerages and can be sent over email.
- A buyer and seller is also entitled to their side of the escrow file from the escrow company who conducted the escrow.
- The advertising for the property is often still available on line by the time a dispute occurs.
- Often, helpful realtors will provide key emails and texts regarding the transaction to their client.
- Witnesses may provide declarations in preparation for a mediation or agree to be available in person, over Zoom or by phone.
- The parties sometimes do (and should in my opinion) allow the other party to conduct a site inspection of the property to see in person the damages claimed. Smart attorneys with good cases actually invite the other party to see the property and invite them to bring a consultant so they can see for themselves the damages.
- The multiple listing service has historical data on a property that can be accessed by a realtor.
- Anyone can view the city and county records on a property.
- Conducting a Google search on a party, realtor or property often yields helpful information.
- Google Earth keeps historical records/photos of properties.
- Neighbors love nothing more than talking about a property, especially if there were issues there.
- Past tenants, especially aggrieved ones, love to talk about properties they lived in.
- Past owners of properties are easy to find.
- NextDoor and Yelp are full of information (most of it complaining).
- Local handymen may have worked on a property in the past.
- Realtors who have sold the property before the troublesome transaction may have information.
- Private investigators are adept at unearthing hard-to-find information.
No way to get evidence short of discovery?
Nah. Not true.
Cases can and often do settle without formal discovery.
Assessing a failure to disclose claim - buyer and seller
There is no big mystery or United States Supreme Court precedent to be set in failure to disclose cases. More often than not, if there is a failure to disclose issue at play, it is more so a failure to adequately and thoroughly disclose a material fact about a property, not a complete failure to disclose the material fact. And in most of the cases, the failure to disclose was a mistake, not intentional misconduct.
Luckily for practitioners in this area of the law, there are documents galore to aid in assessing the matter. Both buyer and seller will be looking at those same documents and it will ultimately boil down to whether a material fact: (1) was disclosed at all; (2) inadequately disclosed; and whether, in either instance (3) a buyer was on actual or constructive notice of that material fact.
Once you have established liability (or not), you then consider the diminution in value of the property which is the delta between what the buyer was sold and what the buyer received. More often than not, attorneys argue the cost of repair as the measure of damages at mediation.
Buyers and sellers alike will want to start their analysis in the same place and in the same order:
- Look at the advertising including flyers, the MLS listing and any flyers.
- Carefully review the disclosure packet, in particular, the transfer disclosure statement (TDS) and the seller property questionnaire (SPQ). Look at both agent visual inspection disclosures (AVIDs).
- Study any and all reports regarding the condition of the property that are most often seller-provided and will be part of the disclosure packet.
- Request and read emails and text messages between your client and their real estate agent regarding the issues at hand.
Once you have studied these documents, move to the next phase of your analysis:
- If you represent a seller, look to see if there are any reports, documents or otherwise that the seller had in their possession but did not disclose in the sale. If there are any documents that the seller has but did not disclose, ask yourself, would I as a buyer want or need to have known this information about the property in assessing whether to buy or what to pay.
- If you are a buyer, are there any red flags in the disclosures that you may have overlooked and are now complaining about?
- Once you have a sense of how the case is shaping up based on these documents, then move to the next step of gathering additional information such as a site inspection, interviewing of witnesses such as your client’s realtor, obtaining estimates for repair and an appraisal to ascertain the diminution in value of the property.
Then and only then are you ready to work towards settling your case. All of this case preparation can be done short of discovery. These cases most often settle without the benefit of formal discovery so long as they are analyzed and prepared in advance.
I have had mediations where an attorney has not read the disclosure package in detail before showing up for the mediation session or before they sent out their first demand letter. It can be quite embarrassing to be demanding damages for certain “undisclosed” conditions of a property when a disclosure packet is chock full of thorough data about that condition or at worst, red flags about the condition. Since the other party has that same disclosure packet, it is important to thoroughly review the common documents in detail in advance of even bringing a claim.
These cases should and do often settle.
Important elements of an effective failure to disclose brief - buyer
An effective brief from a buyer should at the very least contain the following basic elements:
- A copy of the advertising and analysis of how the advertising was misleading or incorrect
- A copy of the transfer disclosure statement (TDS), the seller property questionnaire (SPQ) and the agent visual inspection disclosures (AVIDs) from both agents and an analysis about why any of those disclosures were incomplete, inaccurate or “thin”
- A copy of the inspection reports on the property to show that the inspectors were unable to determine that there was a defective condition of the property as it was inaccessible, hidden or an area not covered by the inspection
- Photos of the affected areas
- Bids, invoices, estimates or receipts for repair of the affected areas
- Witness statements from prior owners, realtors, neighbors or tradespeople who were aware of the condition of the property prior to the sale
- A settlement demand
- Humility and giving the seller the benefit of the doubt by saying something to the effect that the buyer suspects that the seller may have made a mistake instead of assuming that the seller lied
What is not effective in a buyer’s brief?
- Sending every single page of a disclosure packet to showcase all of the pre-printed disclosures. If a particular disclosure is important, include just that disclosure or a section of that disclosure.
- Statements such as: The seller is a fraud or that the seller is a liar.
- Guesses like: The seller had to have known without any supporting evidence that a seller had actual knowledge.
- Demands containing demand line items for “time and energy expended by buyer in dealing with these problems” or emotional distress damage claims for a breach of contract cause of action.
- Threats
- Overblown estimates or estimates for betterment
- Estimates from friends/family members who are tradespeople
- Overblown estimates from handymen when clearly a licensed contractor will be required to perform the work
- Providing no estimates for work
Important elements of an effective failure to disclose brief - seller
An effective brief from a seller should at the very least contain the following basic elements:
- A copy of the advertising and analysis of how the advertising was accurate.
- A copy of the transfer disclosure statement (TDS), the seller property questionnaire (SPQ) and the agent visual inspection disclosures (AVIDs) from both agents and an analysis about why those disclosures were accurate and at worst, contained “red flags” of certain conditions of the property.
- A copy of the inspection reports on the property to show that the inspectors pointed out defective conditions of the property or at the very least, indicated that further inspection was necessary or that professionals from particular trades would need to opine on particular areas of the property.
- Photos of the affected areas.
- Bids, invoices, estimates or receipts for repair of the affected areas if in fact there was an undisclosed condition.
- Witness statements from prior owners, realtors, neighbors or tradespeople who were aware of the condition of the property prior to the sale to support that there were no such defects found during the seller’s ownership of the property.
- Humility even if the buyer is lacking in it in their approach to the issues.
What is not effective in a seller’s brief?
- Sending every single page of a disclosure packet to showcase all of the pre-printed disclosures. If a particular disclosure is important, include just that disclosure or a section of that disclosure.
- Statements such as: The buyer is a fraud or that the buyer is a liar.
- Threats.
Civil Code § 3343 / The Out-Of-Pocket Rule (between buyer and seller)
Civil Code §3343 provides the measure of damages for a failure to disclose case between a buyer and a seller. This is called the Out-Of-Pocket Rule.
The Rule states, in pertinent part to most failure to disclose cases:
"(a) One defrauded in the purchase, sale or exchange of property is entitled to recover the difference between the actual value of that with which the defrauded person parted and the actual value of that which he received, together with any additional damage arising from the particular transaction, including any of the following:
(1) Amounts actually and reasonably expended in reliance upon the fraud.
(2) An amount which would compensate the defrauded party for loss of use and enjoyment of the property to the extent that any such loss was proximately caused by the fraud.
(b) Nothing in this section shall do either of the following:
(1) Permit the defrauded person to recover any amount measured by the difference between the value of property as represented and the actual value thereof."
At trial, an aggrieved buyer will have to present evidence of that the fair market value at the time of the property at the time of purchase (considering the now-known defects) is less than what the buyer paid. While a buyer can opine on the value of their own home, they are best served by a professional, historical appraisal. Sometimes, the appraisal does not or cannot show that the value of the property was less than what a buyer paid for it.
Most often in mediation, an aggrieved buyer will ask for the cost of repair of the undisclosed defects and will not come armed with an appraisal. Appraisals are expensive and may be difficult to obtain to prove damages. Counsel for sellers almost always argue that a buyer must have an appraisal and an appraisal alone to prove their damages. Some appraisers will appraise the property at the purchase price paid but subject to the now-known defects being repaired, which in essence, is the cost of repair.
A breach of contract claim may provide a buyer with some relief in the event that the property does not appraise for less than the purchase price. The purchase agreement calls for the disclosure of known material facts and defects and the failure to abide by this term is arguably a breach of contract. Civil code section 3300 provides that the damages for breach of contract are "all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom." The potential recovery under Section 3300 would arguably include the cost of repair and the undisclosed material defects, since those damages were proximately caused by a seller's failure to disclose. Along with a breach of contract cause of action comes the ever-potent attorney's fees clause.
See also:
CACI Jury Instruction 1920 (2023 ed.) - Buyer’s Damages for Purchase or Acquisition of Property
https://www.justia.com/trials-litigation/docs/caci/1900/1920/
CACI Jury Instruction 1923 (2023 ed.) - Out of Pocket Rule (for non-fiduciary relationships; buyer and seller)
https://www.justia.com/trials-litigation/docs/caci/1900/1923/
Civil Code §3333 and §1709 / The Benefit of the Bargain Rule (between a buyer and their own fiduciary/realtor for intentional mispresentation)
Benefit of the bargain damages may be available where a party's own fiduciary has committed intentional misrepresentation/fraud in a transaction. There are jurisdictional splits about how, when and if this remedy applies and thus, one should err on the side of caution and focus on Civil Code §3343 as a likely remedy.
Civil Code § 3333 provides in pertinent part: “For the breach of an obligation not arising from contract, the measure of damages, except where otherwise expressly provided by this Code, is the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not.” Civil Code § 3333 damages, according to some cases, are designed to protect the expectancy interest of persons injured by fiduciary fraud by placing them in the financial position they would have been in if the fraudulent representations that induced a transaction were true.
Civil Code § 1709 states “one who willfully deceives another with intent to induce him to alter his position to his injury or risk, is liable for any damage which he thereby suffers.”
Under Sections 3333 and 1709, a buyer who has been defrauded by their own fiduciary in connection with the purchase of residential real property can recover against the broker all damages that were proximately caused by the deception. This may include not only the cost of repair but also the difference between the value of the property as represented and its actual value. This remedy, broad in nature, is far more expansive than 3343.
See also:
CACI Jury Instruction 1924 (2023) - Benefit of the Bargain Damages
https://www.justia.com/trials-litigation/docs/caci/1900/1924/
Preparing your buyer client to sign a 1542 waiver -
home inspections once a claim arises
If your client is a buyer of a property and you are bringing a failure to disclose claim on their behalf, it is very important to advise them about the Civil Code §1542 waiver they will be signing to settle their matter. Because there is a mediation provision in most purchase agreements, a buyer and seller will have to engage in a meditation before resorting to litigation or arbitration. That means, the parties may settle very early into the buyer’s ownership of the property. It is advisable that a buyer, before settling their matter, hire home inspectors to perform a thorough inspection of the property that the buyer attends. Inspections to consider before signing a § 1542 waiver are:
- General home inspection
- Roof inspection
- Pest inspection
- Sewer lateral inspection
- Foundation/structural inspection
- Sidewalk compliance inspection (in certain cities like Oakland)
In addition, a buyer should consider checking both permits and county records. They can sometimes differ.
If you fail to advise your client to obtain their own set of inspections, or they choose to forgo them, be crystal clear (in writing) what the effect of §1542 waiver will have on any newly discovered claims after a settlement is reached.