My wife was the sole owner of the property here in Cali. We sold the house back in January 2018 to a buyer who is a luxury home contractor and investor. He was buying the property to make it a rental. The property has an attached second unit which used to be a garage. When my wife bought the property, it was listed as a guest house unit. Her realtor was able to pull permits and certificate of occupancy of the second unit. During the time my wife owned the property, there was no renovation or construction made to the second unit. It was sold to the buyer in the same condition when my wife bought it. Also, in 2016, we had an unpermitted patio cover built attached to the house. This unpermitted patio was verbally mentioned to the buyer before he made the offer. His home inspection report also showed that it was not a permitted patio. We have been honest about this to the buyer from the start. When he asked for repair request credits, he never asked credit to make the patio up to code.
Unfortunately, my wife did not mention the unpermitted patio in the disclosure thinking that we had already disclosed it verbally. But that was not an issue to the buyer back then.
The buyer's lender's home appraisal raised an issue about the second unit being a non-conforming structure. In the appraisal, the appraiser mentioned that while there were permits, the second unit's kitchen was not up to code. He mentioned that the cost to cure is $2,500 to remove the wall in the kitchen to pass through the main house. To continue with his appraisal, the appraiser asked us to remove the stove and cap off the gas line, which we did. The appraisal was completed and even though the appraisal came low and had the kitchen issue, the buyer agreed to purchase the house at our agreed price.
The tenant that used to rent the second unit while my wife owned the property asked the buyer if he would renovate the kitchen up to code since they plan on renting the second unit for a few months until they can buy their own house. The buyer replied to him "Just don't burn it". We knew this because the tenant contacted us about it and was asking or help because the buyer had been changing their agreement. On March 2018, the tenant moved out of the second unit.
Fast forward to December 2018. The new property owner was sued by his tenant because the tenant discovered that the second unit kitchen was not up to code. Also, the property owner entered the second unit without the tenant's permission. The city made the property owner renovate the second unit and the patio and the property cannot be vacated until it was fixed per city's standard.
We learned about this when my wife received a demand letter from the buyer's attorney. The buyer is now claiming that my wife did not disclose the unpermitted patio and we made them believe that the second unit was a legal rental unit. He is suing my wife for $400k in damages. The problem with his claims is we have a copy of his home inspection report and appraisal. It appears that they conveniently left those out in their demand letter. He is claiming that we knew that the second unit was not a legal rental unit and did not disclose it. But we gave him all the permits that we were able to get from the city plus the certificate of occupancy. All along we thought that the second unit was a legal rental unit. My wife owned the property for 9 years and has had 3 tenants and no one complained to us about the kitchen. We just found out about it when we saw the buyer's appraisal which the buyer should have received from his lender. Since 2014, The law requires the lender to provide a copy of appraisal automatically free of charge. We were able to get hold of the appraisal report because our agent had a hunch that the buyer is not acting in good faith so she pressured the lender to provide her the appraisal report before closing.
1. Property owner claiming he was not aware of the kitchen issue.
-- we have a copy of his home appraisal which he should have received. If he claims he didn't get the appraisal report, then the tenant asking him about the kitchen renovation should have raised a red flag for him. But as what the tenant told us, he just shrugged it off. It's either he did not do his due diligence or just completely ignored this issue and continued to rent out the second unit at that condition.
Can his appraisal report be used against him to rebuff his false claim? Aside from that, we can get a sworn statement from the tenant as well. And I don't think the lender would break the law and hide the appraisal from him.
2. Property owner claiming that my wife misrepresented in the disclosure about the unpermitted patio.
--we know that verbal agreements mean nothing for this transaction. So we're not counting on that. Even if we were very vocal about the unpermitted patio, he can just claim that we did not inform him. Also, my wife leaving out the unpermitted patio in the disclosure is not going to help because she thought they already acknowledged the fact that the patio was not permitted. But we have a copy of his home inspection report where it clearly states that the home inspector said that the patio was not permitted at that time. How did the home inspector know? Because we told him when he asked us if there was a permit for the patio. By the way, the buyer was also present at the time of home inspection. Since he used the home inspection report to request for repair credits, it meant that he read the report. There were credit requests to fix some items that was in the patio. Can we use his own home inspection report to prove that he is falsely claiming that we intentionally misrepresented the patio's condition?
One attorney that we consulted ($450/hr) the other day seems to only be interested in the settlement. He didn't even tell us how we can prove that the buyer was lying. We showed him all the documents. He was already computing on the true cost of damages that the buyer may get. It was really disappointing. It felt like he is planning to hand us to the buyer's attorney in a silver platter for them to split what we will be settling. But we are not going to settle because we acted in good faith.
Knowing all the info I provided, do you think responding to his demand letter with our proofs would make his false claim frivolous? Thanks for reading.
Unfortunately, my wife did not mention the unpermitted patio in the disclosure thinking that we had already disclosed it verbally. But that was not an issue to the buyer back then.
The buyer's lender's home appraisal raised an issue about the second unit being a non-conforming structure. In the appraisal, the appraiser mentioned that while there were permits, the second unit's kitchen was not up to code. He mentioned that the cost to cure is $2,500 to remove the wall in the kitchen to pass through the main house. To continue with his appraisal, the appraiser asked us to remove the stove and cap off the gas line, which we did. The appraisal was completed and even though the appraisal came low and had the kitchen issue, the buyer agreed to purchase the house at our agreed price.
The tenant that used to rent the second unit while my wife owned the property asked the buyer if he would renovate the kitchen up to code since they plan on renting the second unit for a few months until they can buy their own house. The buyer replied to him "Just don't burn it". We knew this because the tenant contacted us about it and was asking or help because the buyer had been changing their agreement. On March 2018, the tenant moved out of the second unit.
Fast forward to December 2018. The new property owner was sued by his tenant because the tenant discovered that the second unit kitchen was not up to code. Also, the property owner entered the second unit without the tenant's permission. The city made the property owner renovate the second unit and the patio and the property cannot be vacated until it was fixed per city's standard.
We learned about this when my wife received a demand letter from the buyer's attorney. The buyer is now claiming that my wife did not disclose the unpermitted patio and we made them believe that the second unit was a legal rental unit. He is suing my wife for $400k in damages. The problem with his claims is we have a copy of his home inspection report and appraisal. It appears that they conveniently left those out in their demand letter. He is claiming that we knew that the second unit was not a legal rental unit and did not disclose it. But we gave him all the permits that we were able to get from the city plus the certificate of occupancy. All along we thought that the second unit was a legal rental unit. My wife owned the property for 9 years and has had 3 tenants and no one complained to us about the kitchen. We just found out about it when we saw the buyer's appraisal which the buyer should have received from his lender. Since 2014, The law requires the lender to provide a copy of appraisal automatically free of charge. We were able to get hold of the appraisal report because our agent had a hunch that the buyer is not acting in good faith so she pressured the lender to provide her the appraisal report before closing.
1. Property owner claiming he was not aware of the kitchen issue.
-- we have a copy of his home appraisal which he should have received. If he claims he didn't get the appraisal report, then the tenant asking him about the kitchen renovation should have raised a red flag for him. But as what the tenant told us, he just shrugged it off. It's either he did not do his due diligence or just completely ignored this issue and continued to rent out the second unit at that condition.
Can his appraisal report be used against him to rebuff his false claim? Aside from that, we can get a sworn statement from the tenant as well. And I don't think the lender would break the law and hide the appraisal from him.
2. Property owner claiming that my wife misrepresented in the disclosure about the unpermitted patio.
--we know that verbal agreements mean nothing for this transaction. So we're not counting on that. Even if we were very vocal about the unpermitted patio, he can just claim that we did not inform him. Also, my wife leaving out the unpermitted patio in the disclosure is not going to help because she thought they already acknowledged the fact that the patio was not permitted. But we have a copy of his home inspection report where it clearly states that the home inspector said that the patio was not permitted at that time. How did the home inspector know? Because we told him when he asked us if there was a permit for the patio. By the way, the buyer was also present at the time of home inspection. Since he used the home inspection report to request for repair credits, it meant that he read the report. There were credit requests to fix some items that was in the patio. Can we use his own home inspection report to prove that he is falsely claiming that we intentionally misrepresented the patio's condition?
One attorney that we consulted ($450/hr) the other day seems to only be interested in the settlement. He didn't even tell us how we can prove that the buyer was lying. We showed him all the documents. He was already computing on the true cost of damages that the buyer may get. It was really disappointing. It felt like he is planning to hand us to the buyer's attorney in a silver platter for them to split what we will be settling. But we are not going to settle because we acted in good faith.
Knowing all the info I provided, do you think responding to his demand letter with our proofs would make his false claim frivolous? Thanks for reading.
