Update From The Recent C.A.R. Meetings In San Diego

I recently attended the Legal Affairs Forum at the C.A.R. meetings in San Diego. Several subjects were discussed that I want to pass on, as I have experienced issues with them recently in my practice.

The first subject concerned the use of email vs. texting as a method of communication with a client and issues related to the preservation of such communications.

Memorializing and preserving substantive communications in a transaction is something that needs to occur. This would include any form of electronic communication. There are apps available for most phones that will preserve text communications. Alternatively, screenshots of text communications can be taken. If you are going to capture messages by screenshotting, here are some suggestions that I have come up with due to encountering problems with this process in trials.

First, make sure the screenshots capture the entire text message and don't cut off any words. Second, the date and time of each communication needs to be captured in the screenshot. Third, you should capture all text messages, not just those that you believe are important or appropriate. Phone records are commonly subpoenad as part of any legal dispute. Those records will indicate the date and time of any texting. The other party may also have preserved their text messages. It's usually better to provide a complete set of the messages rather than having to explain why there are gaps in the text exchanges and what was discussed/communicated in those exchanges.

Another subject at the meetings concerned the impact of social media on real estate transactions. More of our clients are now involved in communicating with neighbors and other interested parties regarding issues in their neighborhoods, via Nextdoor or other similar community platforms. Such issues as neighborhood nuisances, barking dogs, crime houses, grow houses, and other such subjects can be topics of discussion. What a seller states on social media regarding such issues may have an impact on their disclosure obligations. The PRDS Forms Committee has addressed this issue in the most recent revisions to the Supplemental Seller's Checklist and in the new Seller Advisory Regarding Completing Disclosure Forms. A seller should consider how they described an issue in social media versus how they may be describing it in their disclosure documents. If a real estate licensee is involved in a transaction and lives in a neighborhood or farms that neighborhood, does that licensee post on social media or review it? If not, is there some duty to do so when involved in a transaction in that neighborhood? These are just a few of the questions that are starting to be asked when evaluating what duty, if any, currently exists with regard to social media.

Another subject that was discussed was the "fixer-upper syndrome." This is certainly not a new topic but one that continues to raise multiple issues. First, in what capacity have people acted with respect to the property (e.g., seller, contractor, owner-builder, real estate licensee, developer, etc.)? Different duties exist depending upon in what capacity or capacities a party has acted or performed with respect to the property. A seller has a duty to disclose material facts that they are aware of that may impact the value or desirability of the property. A real estate licensee has a similar duty but also has additional duties, including conducting a visual inspection of the reasonably accessible areas of the property, making inquiries, and advising and counseling their client, among others.

Supervision of the construction brings with it additional knowledge and may impact any of these duties. Contractors and others who have performed work at the property and developers involved with the property will have responsibility for the work they performed or had performed on their behalf. The responsibility for work performed may also be impacted if a party has directed the method or manner in which the actual work is to be performed. This involvement may alter the ability of that party to rely on the work performed by any contractor and may lead to attempts to disavow responsibility for that work. Usually, there are no written agreements between the various parties to these fixer-upper projects indicating who will be responsible for performing any given task and allocating liability for that task in the event there is a problem. These understandings and expectations typically don't get voiced until a problem arises, and then the finger-pointing starts. This finger-pointing usually includes a claim that those who were involved in the original acquisition of the property have additional knowledge about its preexisting condition compared to its finished condition and therefore have obligations to disclose those conditions.

The specific issues or conditions that continue to exist with respect to fixer-uppers are the potential for Code lot violations, work being performed by unlicensed or unqualified individuals, unpermitted work, permits that are not finaled, the release of asbestos into the atmosphere, the removal of load-bearing walls without proper engineering, and concerns regarding the quality or performance of new windows, sinks, showers, roofs, etc. Generally speaking, even if a contractor is hired to perform this work, there is not going to be any insurance coverage available to that contractor for any defective work. Consequently, the financial wherewithal of that contractor and any subcontractors is a potential consideration, along with their license status and whether they will stand behind their work on the basis of any express warranty.

The foregoing is not intended as a complete list of the potential issues that exist with respect to fixer-upper projects. If you are participating in one of these projects in any capacity, it may be helpful to consult with a qualified real estate attorney before doing so.

The last subject I want to touch on relates to false or misleading photographs being placed on the MLS. The general rule that was expressed was that as long as the enhancement of an image does not materially change the physical characteristics of the property, that image is acceptable. Examples provided included removing garbage cans or cars or replacing grass as forms of acceptable enhancement. On the other hand, removing utility lines, changing the views, landscaping, or fencing, or changing the relationship of nearby properties, structures, or construction to the property being marketed were not acceptable practices. Another example given was adding non-existent rooms to a photograph of the property.

If you have any questions or want more details on any of these subjects, feel free to contact me via email at dave@rhrc.net.