BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
Statutes of Limitations
Q: I represented a buyer who closed escrow about three years ago. Recently the buyer discovered a foundation issue that will be expensive to repair. The foundation contractor who he recently hired stated that the foundation problems are many years old and must have been there when he bought the house. There was no disclosure of any such problem by seller, and neither the agents’ AVID’s nor the home inspection report at that time referenced a foundation problem. My buyer has asked me if he still can sue the seller and maybe the home inspector – or is it too late? What should I tell him?
A: Tell your buyer to immediately get to a qualified California real estate attorney. The attorney will review everything and determine if there is a case and the likelihood of any recovery. The attorney will assess whether any of the theories of claim may be barred by a statute of limitations.
There is no such thing as a single “statute of limitation.” There are several statutes of limitation depending on which legal theory a claim may be based. The most common types of claims in real estate transactions and their respective statute limiting the time within which to bring a claim are:
1. Breach of Written Contract: 4 years
2. Fraud or Mistake: 3 years, commencing on date of discovery of fraud or mistake
3. Breach of Fiduciary Duty: 4 years
4. Real Estate Agent Duty to Inspect and Disclose: 2 or 3 years (See the CAR Legal Memo referenced below for details)
5. Latent Defect in Real Property: 10 years
For a more detailed look at statutes of limitation, see the CAR Legal Memo on the subject at:
http://www.car.org/legal/miscellaneous-folder/statute-of-limitations-deadline/?redirectFrom=login
6. New construction built by a builder and sold for the first time after January 1, 2003 has its own set of statutes of limitations.
For a summary of these statutes limiting lawsuits against the builder, see the Weekly Practice Tip entitled “New Construction Defect Law”
TOLLING: However, even these time frames can be extended under certain circumstances if the statute has been “tolled” meaning that the statute is put on hold for a period of time. There can be several reasons for this such as mental incapacity. Also, the parties can agree in writing to toll the applicable statute, perhaps while they attempt to negotiate or mediate a resolution. This should only be done by attorneys.
PRACTICE TIPS
1. Never give a client advice on how much time they have to bring an action on a real estate claim. That would be the practice of law. This is a complicated area of the law.
2. Tell your client or past client to immediately consult with a knowledgeable California real estate attorney. Only an attorney can advise a party on their litigation rights or lack thereof.
DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.