Flippers Will Need to Disclose Their Work Under a New California Law

kitchen fitters installing some cabinets

What is Included in the New California Law

Starting July 1, 2024, some sellers of residential California property may be required to make additional disclosures if they flip property, or otherwise sell it on short order, after making repairs. Assembly Bill 968 amends the statutorily prescribed Transfer Disclosure Statement (TDS) from Section 1102.6 of the Civil Code. This Section requires that certain sellers of residential properties in California disclose specific facts about the property and its history. Some sellers of residential property are exempt from these statutory disclosure obligations, including properties sold in the course of the administration of a descendant’s estate and transfers by foreclosure. However, if the sale is not exempt, these disclosure obligations cannot be waived, even if the parties agree to sell the property “as is.”

In addition to the disclosure requirements in the TDS, sellers of property have additional common law duties to disclose any material condition of the property that would affect the buyer's decision. A seller’s failure to make these disclosures in good faith may give rise to liability. A false representation or an omission of a material fact could create liability for fraud, with the buyer being entitled to rescind the sale or money damages. A fraud occurs within the context of property disclosures if the misrepresentation of fact or known omission is material, if it induced the buyer to purchase the property at the sales price, and if the seller intended that the buyer rely on the disclosure. A seller’s agent’s knowledge of a defective condition can sometimes be imputed to a seller, with the agent jointly and severally liable with the seller for the full amount of damages.

AB 968 was enacted to protect buyers from purchasing homes with shoddy renovations. While low-quality work can lead to expensive future problems for homeowners, if those problems have not appeared at the time of sale, the seller has no disclosure obligation regarding the repairs under the current law. AB 968 applies to sales of residential properties containing 1 to 4 units that the buyer resells within 18 months after purchase. The law requires such sellers to disclose:

  1. a list of room additions, structural modifications, other alterations, or repairs made to the property since title to the property was transferred to the seller that were performed by a contractor with whom the seller entered into a contract;
  2. any contact information for the contractor if the cost of the repairs exceeded $500; and
  3. Copies of Any permits obtained any for any of the work disclosed to the buyer.

Contact A Real Estate Attorney Today

If you have any questions about your disclosure obligations under the law, or if you feel that you were fraudulently induced into purchasing your property, contact Andrew Catterall at Zacks & Freedman, PC for guidance.

Neither this website nor this post are intended to create an attorney-client relationship.