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Breach of Contract: You Have Been Accused!

(And it could adversely affect your Asset Protection)

You sold your house and now the buyer has retained an attorney and you have been accused of failing to disclose material defects in the subject property. You own a small family business and you want to assure your asset protection.

What should you do?

Well, I guess it depends. If you are guilty of breach of contract in intentionally failing to disclose a material defect in the subject property, you should immediately consult an attorney so that you can exercise damage control and ultimately do the right thing.

For example, you repaired the roof on the house four times in seven years. You thought that the roof was fixed. You considered disclosing this fact in writing to your buyer, when you noticed on the real estate transfer disclosure statement that the question is asked, "Are you (Seller) aware of ... flooding, drainage, or grading problems?" You thought about it and decided that roof leaks really are not "flooding" problems.

Then, you looked at the question that asked "Are you (Seller) aware of any significant defects/malfunctions in any of the following ... roof(s)?" You thought about it and decided, well, the roof used to leak, but I fixed it and it does not leak any longer. So you decided not to make a disclosure.
 

Breach of Contract or Real Estate Fraud?

Now, the letter from the buyer's lawyer says that you had made roof repairs, knew that the roof was no good, and intentionally concealed that fact in a fraudulent manner from the buyers. The lawyer says that California laws required disclosure.

So, are you really guilty of real estate fraud? Is this really a non-disclosure? Do you have exposure for legal liability to the buyer for failing to do so?

In this event, you want to respond immediately to the buyer's attorney and establish a conduit for negotiation where you can communicate without making a confession, and without denying that anything at all is wrong. The safest way to do this is with an attorney doing the communicating for you. This is because when you communicate, anything you say can and will be used against you in a court of law. The buyer's attorney may not be benevolent, or even fair, and may instead be looking for a jackpot. If an attorney speaks for you, nothing that that attorney says can or will be used against you, since it is not your testimony.

A negotiation should follow and the problem should be promptly resolved.
 

False Accusations of Breach of Contract

If you change even one fact in this scenario, the strategic and tactical approach could be materially altered.

For example, you are being falsely accused. You only owned the house for two years and you made no roof repairs at all. Evidently, your predecessor did. You did not know of any prior roof leaks or repairs. Now, you are at the hands of the buyer's attorney who is making serious demands upon you and accusing you of wrongdoing.

You have several alternatives: You could get angry, call the buyer or the buyer's attorney and really tell them off. This is probably not your best approach.

You could write a letter back explaining the facts. At first, this seems reasonable. Experience has shown, though, that the buyer's attorney may not be dissuaded by your letter, and if you just happen to pick one wrong word, the buyer's attorney may choose to distort or misinterpret it and use it against you.

Again, under these circumstances, your best interests are served by having an intermediary communicate for you. In this way, emotions are diffused, strength is shown, and communication is managed in the safest way.

This does not mean that a great deal of money needs to be spent. On the contrary, a well-written letter from your lawyer, strongly and courteously, professionally and reasonably, clearly and politely explaining the facts and circumstances may bring the matter to an orderly end.

At Spierer, Woodward, Corbalis & Goldberg, Attorneys at Law, A Professional Corporation, we have seen many such accusations end quickly and economically. We have also seen circumstances where a do-it-yourself approach has been tantamount to pouring gasoline on an already incendiary situation, leading even an innocently accused person in a position to spend much more money and take much more time than necessary.

Visit our Real Estate practice area to learn more about our approach to managing the best possible outcome - whether it is to avoid, assert or defend - breach of contract claims and other disputes between buyers and sellers.

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