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Real Estate Disputes in California: Common Pitfalls to Avoid Litigation


Real estate disputes in California arise because buyers and sellers don’t know how to avoid them in the first place. Knowing the common pitfalls to watch out for helps to avoid a transaction that ends up in legal proceedings. As San Francisco Landlord-Tenant and Real Estate Attorneys, we help our clients handle real estate disputes. In this article, we’ll outline common causes of real estate disputes in California and how to avoid them.

Breach of Contract

When buyers and sellers sign a real estate purchase contract, it contains terms and conditions to which both parties must comply. This includes terms such as closing date, contingencies, and items to be included with the purchase of the property. If either the buyer or seller fails to follow the terms of the contract, the other party may have a right to seek legal remedies for breach of contract. In fact, many contracts require that buyers and sellers resolve disputes through mediation and arbitration – not filing a lawsuit. 

Read the Real Estate Sales Contract Before Signing

To avoid real estate disputes in California, buyers and sellers must read the real estate sales contract carefully. In some cases, the real estate agent’s boilerplate contract may not thoroughly allow the parties to achieve their goals. Some real estate transactions are not typical. These situations may require the assistance of a real estate lawyer. A real estate attorney can prepare a purchase contract or review a contract to clarify the rights and duties of each party.

In addition, an attorney can look for potential problems with a contract and negotiate to resolve the issue. It can be a wise decision to have an attorney review a contract before signing it. This extra effort can prevent getting stuck in a contract with unfavorable conditions, and a legal dispute later on.

Breach of Duty or Negligence

Real estate disputes in California can also arise with a real estate agent. Remember, real estate agents have a fiduciary duty to act in best interest of their clients. This is in addition to their contractual responsibilities under their contracts with their clients.  Agents cannot place their own interests, or the interests of a third party ahead of their client’s interests. 

Real estate agents must keep sensitive client information, such as financial data, completely confidential. In addition, real estate agents must perform to the best of their abilities. Real estate agents are responsible for financial damage they may cause by a negligent mistake that causes a client to lose money. The real estate agent has a duty to disclose any information that would benefit their client. What if a real estate agent knows that a property has a structural defect and does not inform the client? In that instance, the client has the right to file a lawsuit against the real estate agent.

Specific Performance of Contract

One of the most common causes of real estate disputes in California is because one party fails to perform the obligations of the contract. This occurs when either party in a real estate purchase contract refuses (without a valid legal excuse) to go through with the purchase. In that case, the other party has a right to file a specific performance lawsuit. They also have a right to seek a court judgment or arbitration award requiring the other side to complete the purchase. This is an alternative to seeking damages for breach of contract.

Determining which remedy makes the most sense will depend on the facts. Pending resolution of the dispute, it often makes sense to record a notice of pending action. This is often called a “lis pendens.” Its purpose is to tie up title until the dispute is resolved. In such situations, it’s important to speak to an attorney as soon as possible. 

Boundary Disputes

Boundary disputes in California may arise when neighbors or other property owners are uncertain, or disagree, about the boundary lines. This may happen for a variety of reasons. It’s possible the property boundaries were not properly surveyed, or were rendered uncertain by an earthquake. Or, the people living there may have used a property line that is not consistent with the legally registered property line. No matter the reason, it may result in real estate litigation. To avoid real estate litigation from boundary disputes, it’s important to research the legal boundaries of the property. If there is any confusion around the property lines, a lawyer can help you understand any potential lawsuits and how to avoid them.

Seller’s or Landlord’s Failure to Disclose a Defect 

Defects on a property can happen from building materials, installation problems, appliances included in the sale, and many other reasons. In some cases, defects on a property are readily apparent. In others, they may not reveal themselves until later. One of the most common reasons for real estate disputes in California is the seller’s failure to disclose material facts of the property prior to the close of sale. California law requires sellers of residential real estate to disclose what they know about the property prior to closing the transaction. 

If a seller fails to disclose a known defect that is not evident, the buyer has the right to file a lawsuit against the seller. Keep in mind, the buyer must prove that the seller should have reasonably known about the defect and purposefully concealed it. Some of the most common property defects that lead to disputes are: mold in the walls, leaks, roof problems and non-permitted improvements. For this reason, it’s important that buyers obtain a property inspection in order to reveal potential defects in a property.

Similar rules apply to landlords, who normally also have a legal duty to disclose known defects and material facts (e.g. ongoing nuisance behavior by a tenant in the building).

Possible Solutions for Real Estate Disputes in California

It’s not uncommon for problems to arise in real estate transactions. When both parties make an effort to communicate clearly, it can go a long way to prevent problems from arising. This helps everyone ensure their expectations are met. For instance, it may be necessary to move the closing date due an issue with financing.

By maintaining a spirit of cooperation, both parties may be able to resolve the issues and continue with the transaction. If this is not possible, legal representation helps the parties handle the dispute correctly and understand the issues involved.

If you need assistance with a potential real estate dispute, contact Steven Adair MacDonald & Partners at 415-562-0504.

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