San Diego Housing Bubble News and Analysis

Bumping this up, as I too am interested in responses about disclosure.

Technically, it was not a class action law suit. Class action lawsuits are brought in federal court, construction defect litigation is (generally) a state court issue. CD litigation is often multiple plaintiffs with similar, though often not identical claims.

Often homeowners are promised something for nothing by attorneys, and sometimes get it. Sometimes (but certainly not always), the defects claimed are insignificant, and depending on when the house was first sold, may not even include any actual damage or even claims of damage. Additionally, homeowners are often not even aware of the actual claims made on their behalf, and short of an actual trial (or deposition), most evidence of defects developed by the plaintiff's attorneys and consultants are priveleged, and the homeowner never sees it.

That said, you should probably request all correspondence between the seller and their attorneys and find out exactly what the significant claims were and have your own inspector investigate those claims. If the litigation reached deposition stage, and the homeowners were deposed, demand a copy of their deposition transcript. (Most CD litigation does not reach that stage.)

Hi SK, thanks for the inputs... the note in the disclosure says that it was settled out of court. So does it mean a deposition might not have happened? Anyways its a good point that you mentioned that we could ask the correspondence between the attorneys and sellers

I remember back in the day there was a class action suit brought against a developer for polybutylene piping. There was a settlement. People got money, but some people didn't remedy the problem.

At least 95% of CD cases settle before a trial starts, and most that get that far settle before it goes to a jury. Of the 100's of cases I've been involved with (on the consultant side), maybe 15 to 20% get as far as homeowner depositions, most settle at some stage before that. (I can only recall 2 that got to a verdict, out of probably 300 cases, involving maybe 10,000 homes over the last 10 years.) Also, some settlements include non-disclosure clauses prohibiting the plaintiffs from disclosing settlement terms. If the sellers make that claim, call bullshit. You don't need to know anything about the settlement terms. You only need to know about the claims, those are not part of standard non-disclosure clauses. As I said, the claims might be bogus or incidental, but at least you can have the opportunity to investigate their veracity.

Try talking to the neighbors, too. (You should do that anyway to see if you like the neighbors).
They may know the history well and they may also know of other things that are problems in the tract.

thanks again.... one main question is am i required to disclose about this if I were to sell this home again. Also generally do homes with such disclosures have issues with resale.

That's two good questions!! But not being a real estate attorney nor a broker, I don't know the answers to either question. I suspect you are only required to disclose what you know. If you learn that the defects are significant, you probably won't want to buy the house. If you learn they're insignificant there's nothing to disclose. But get better advice before you sell the house you haven't purchased yet :)

am i required to disclose about this

Yes.

We bought a home that was involved in a similar suit about water logging, drainage and resultant differential settlement (of soil) issues. We were given a few microfilm reels of legal paperwork during disclosure (the litigation happened in the '80s). Being a nerd, I even went to a library and read some of the microfilms and concluded most of the issues litigated were fairly minor. The seller got an award and used it to put some french drains. When we sold the house, we disclosed and handed over the microfilm reels (not sure if the buyers understood what to do with them; This was in 2005, when microfilm was obsolete).

The important thing is, our agent asked us if there was any lawsuit regarding our property and wanted enough information so that we were all on safe ground with respect to disclosure.

All material facts must be disclosed to potential buyers.

I have a friend in Penasquitos with that problem in her house. Apparently you had to have had burst pipes during a certain timeframe to collect - so they didn't collect a dime. Now, years later, all of their water lines are bursting and they're looking at spending serious $$ to replace all their pipes. It's so bad they turn off the water to their house when they go away for a weekend, out of fear they'll get another burst pipe.

"All material facts must be disclosed to potential buyers."

That's precisely the OP's question: Is this fact material or not? The answer is not obvious to me.

I bought a new house from Centex in Orange County in 2001. A couple of years later we got letters from attorneys inviting us to sue Centex. The builder sent counter-letters arguing that litigation could be lenghty and that resale values may be depressed until a settlement is reached. Did I mention that the houses had no problems (defects) whatsover?

I returned the lawyer's postage-paid envelope with some obscenities inside. Ambulance chasers like them make it harder to invest and create jobs.

Do you have to have "proven" fact in order to disclose? Our property had a water issue too, overwatering by the condo conversion next door, up the hill. (Don't buy a house on the bottom of a hill!) The water flowed downhill and through the city's meter, along the pipes and right under house. It was a bad scenario and took almost a year to get the condo conversion to do something. We installed french drains and a sump pump. The pump is on city property, in front of the water meter. I know, I know, its bad, but the City would do nothing and there was mass amounts of water coming up from ground onto the house. Cost thousands of dollars too.... Do we have to disclose this?

Do you have to have "proven" fact in order to disclose? Our property had a water issue too, overwatering by the condo conversion next door, up the hill. (Don't buy a house on the bottom of a hill!) The water flowed downhill and through the city's meter, along the pipes and right under house. It was a bad scenario and took almost a year to get the condo conversion to do something. We installed french drains and a sump pump. The pump is on city property, in front of the water meter. I know, I know, its bad, but the City would do nothing and there was mass amounts of water coming up from ground onto the house. Cost thousands of dollars too.... Do we have to disclose this?