California has complex real estate laws that govern all aspects of buying, selling, and owning real property in the state. The California Civil Code, various California Codes, and precedents set by prior court cases establish the legal framework for real estate transactions in California.
Some of the key sources of real estate law in California include:
- The California Civil Code – Sections on property ownership, transfers, disclosures, contracts, deeds, mortgages, foreclosures, landlord-tenant relations, and more impact real estate.
- The California Business and Professions Code – Governs real estate licensing and regulates the duties of real estate agents and brokers.
- Local ordinances and codes – Municipalities establish their own real estate rules on zoning, property taxes, rent control, and other hyperlocal issues.
- Case law – How courts have ruled on real estate disputes, breaches of contract, negligence, and fraud become part of the common law.
Understanding how these codes and laws apply to your specific real estate situation is crucial when buying, selling, or managing property in California. Navigating the complex legal landscape often requires working with a knowledgeable real estate attorney.
Key Legal Issues in California Real Estate Transactions
There are several common legal issues that come up for California real estate buyers, sellers, brokers, landlords, and tenants during the transaction process:
Use of Real Estate Lawyers in California
California does not require routine real estate transactions to be handled by attorneys. Sellers can market and sell properties on their own or through a licensed real estate agent. Buyers do not need to have an attorney during home purchases in most cases.
However, real estate attorneys are commonly used in California for several key reasons:
- To review and negotiate purchase agreement terms to protect client interests
- To ensure proper preparation and execution of all required disclosures and documentation
- To provide counsel on complex transactions, commercial deals, or issues arising during the transaction
- To assist with the closing process and ensure the buyer takes clear title
While attorneys are not mandatory, they can help California real estate clients avoid expensive problems down the road. Their services are considered best practice for high-value transactions or deals with complicated factors.
Statute of Limitations in California Real Estate
- The statute of limitations dictates the timeframe a plaintiff has to file a lawsuit for an alleged wrong. This is critical in real estate matters.
- In California, plaintiffs generally have 4 years to file claims against real estate agents, brokers, or sellers related to transactions or contracts. This includes claims of fraud, misrepresentation, breach of fiduciary duty, and other issues.
- Claims against construction defects have a 10-year statute of limitations in California. Lawsuits related to errors in surveys also fall under the 10-year limit.
- If a real estate legal issue arises, it's essential to act quickly within the timeframe or waive the right to sue. An experienced real estate lawyer can advise on the nuances based on the specific situation.
California Real Estate Laws and Regulations
California real estate laws cover everything from how agents and brokers must conduct business to landlord-tenant relations, disclosure requirements, property taxes, and zoning.
Key statutes and regulations governing California real estate include:
- The California Civil Code’s Title on Real or Immovable Property
- The California Code of Civil Procedure's Real Property statutes
- The California Business and Professions Code for Licensed Professionals
- Federal laws including RESPA, Fair Housing Act, FIRREA, and more
County and city codes also establish local real estate rules related to rent control, zoning restrictions, noise ordinances, and other topics.
Navigating this complex web of laws is difficult for the average person. Real estate attorneys are essential for interpreting how the laws apply to any property issue or transaction.
Lawsuits Against Real Estate Agents in California
Suing a real estate agent or broker in California must happen within 4 years from the date of the incident under the statute of limitations for professional negligence.
Most lawsuits against Realtors fall under claims of breaching their fiduciary duty, misrepresentation, disclosure failures, or negligence. Common allegations include:
- Failure to disclose material facts about a property
- Providing false information regarding a property
- Not properly vetting the financial status of buyers
- Not advising clients correctly on market factors or value
- Causing a transaction to fail by not fulfilling duties
Claim amounts, strength of evidence, lawyer costs, and other factors impact one's chance of successfully suing an agent. Proper documentation and timing are key.
Suing After Closing Deadlines in California
- Lawsuits related to property conditions, misrepresentations, fraud, or concealment issues typically must be filed within 3-5 years from the close of escrow in California.
- For construction defect claims, homeowners have 10 years under the statute of repose. This timeframe is extended for latent defects that cannot be observed during a general inspection.
- While strict deadlines apply, there are exceptions. An experienced real estate litigation lawyer can provide guidance on exceptions and the likelihood of success for a claim after closing.
Buyer Breach of Contract in California
If a buyer breaches the purchase agreement in California by refusing to close escrow without legal cause, the seller has a few options:
- Sue for specific performance to try to enforce the contract.
- Keep the buyer's deposit as monetary damages.
- Sue for additional damages beyond the lost deposit amount.
Sellers should consult a lawyer to determine the best recourse. Much depends on the real estate market, property type, deposit amount, and whether a buyer is trying to delay closing versus canceling outright.
Buyers can also be sued if they fail to perform according to stipulations in the purchase contract after closing. Common claims include non-payment of HOA dues, excessive property damage, and failure to maintain insurance.
Seller Breach of Contract in California
California law allows sellers to back out of a purchase agreement if they have a legally valid reason, such as:
- The buyer’s failure to perform contractual duties
- The discovery of title defects or liens
- Justifiable revocation of disclosures before closing
Sellers cannot arbitrarily cancel a sale once under contract. If no legal cause exists, the buyer can sue for damages and specific performance.
Damages may include higher costs to secure another property, moving expenses, hotel fees, and other costs stemming from the seller’s breach.
Sellers must work closely with their real estate attorney to appropriately vacate a purchase agreement to avoid litigation.
Buyer's Remorse and Cancellation Rights
- In California, buyer's remorse is not grounds for a purchaser to cancel and back out of an executed real estate deal. Legally binding contracts exist once all terms are accepted.
- Buyers have a right to cancel only if the seller breaches terms or if an inspection contingency or appraisal clause is exercised appropriately.
- Sellers also cannot arbitrarily cancel due to seller’s remorse. Only specific legal justifications allow a party to a contract to withdraw.
- Buyers may be able to cancel shortly after signing a purchase agreement if they do not receive their disclosure paperwork in the proper timeframe. This opportunity disappears quickly.
- Buyers should work with their real estate attorney to understand their rights and cancellation abilities before closing.
Earnest Money Disputes in California
The buyer typically provides an earnest money deposit when making an offer on California real estate. This shows the buyer is serious about purchasing the property.
If the deal falls through, disputes can arise as to whether the buyer or seller gets the deposit money under California law. Factors include:
- Which party is responsible for the failed transaction
- Exact verbiage in the purchase agreement's earnest money clause
- Any breach of the purchase contract
- Terms in the termination agreement signed by both parties
By default, California purchase agreements allow the seller to retain the earnest money if the buyer breaches the contract. But exceptions exist.
A real estate lawyer can best determine who has the proper legal claim to earnest money based on the specific circumstances of a failed deal.
Key Takeaways for Avoiding California Real Estate Disputes
- Work with a knowledgeable real estate attorney from contract to closing, especially for higher-value properties or complex transactions.
- Know your rights and responsibilities under California laws before signing contracts or terminating agreements.
- Understand important timeframes like the statute of limitations and act promptly if issues arise.
- Only back out of executed contracts for legally justifiable reasons with proper documentation.
- Don’t miss important deadlines for inspections, disclosures, and other contractual obligations.
- Consult an attorney as soon as problems come up to discuss the strength of any case and the best next steps.
- Resolve earnest money disputes cooperatively if possible, as litigation can quickly increase costs for both parties.
- Ensure every “I” is dotted and “T” crossed during the closing process to avoid future title or property issues.
- Be proactive, as an ounce of prevention is worth a pound of cure when it comes to avoiding real estate legal headaches.
Conclusion
Buying, selling, or owning real estate in California involves a myriad of laws and regulations. Working with an experienced local real estate attorney is crucial for avoiding costly problems down the road. Being informed on key laws related to transactions, contracts, disclosures, and dispute resolution will also prime you for a smoother process. With proper diligence, care, and guidance, California home buyers and sellers can tackle deals with greater confidence.
