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Bad Neighbors: What do you have to disclose to a buyer when you’re selling a home?

By: Ronald R. Rossi, Esq. and Laurel Champion, Esq.

We all have neighbors. Sometimes we get annoyed with their kids, their blaring radios, their parked cars, and their football games in the yard. At night, their barking dogs make us want to march next door and give the owners a piece of our minds.

But what happens when you do just that and find yourself involved in a feud like the one between the Hatfields and the McCoys? Can you retreat from the field of battle, sell your home, and let the new buyers cope with the neighbor’s hostilities? The answer is no – not without telling the buyers first.

One of our cases involved a genuinely crazy neighbor engaged in guerrilla warfare with our client who wanted to sell his home in Cupertino. Here’s the story, and here’s what we did to advise future buyers of the problem.

Barking up trouble

The middle-aged couple next door to our client owned five dogs – big dogs – who had the run of the fenced back yard. Apparently these people believed in the value of creating a compost heap, because they never, ever cleaned up after their animals. The smell was, to say the least, pungent.

Our client tried twice to talk to his neighbors about the odor problem. The dog owner responded by threatening to spray the client’s yard with sheep dip, saying that then he’d “find out what bad really smells like.”

The dogs barked late at night and early in the morning. Our client never complained to authorities and never reported the neighbor for having more dogs than permitted by city ordinance.

He did complain to the neighbor after one of the dogs, running loose through the neighborhood, bit his wife and another woman. He assured the neighbor he was not interested in pressing charges but asked the neighbor to provide proof that his dogs were licensed and their rabies shots were current.

He got a torrent of profanity in reply. The neighbor denied that his dogs had been out of the yard and then accused our client’s wife of hosing the fence down every morning at 7:00, just to antagonize his pets! Well, she did water her flowers at 7 a.m., but she wasn’t trying to water the dogs. They barked enough already without that inducement.

The neighbor bragged to our client that he had a lawyer on retainer and was eager to spend some of that money. Our client retorted that he just might have to do that if they couldn’t discuss the situation.

Our client retreated inside his home. A little later, the power went off. The neighbor had used a high-pressure hose on the control panel, trying to blow the main circuit.

Getting out of hand

Shortly thereafter, the neighbor started throwing rocks at our client’s home. That was the last straw. He told the neighbor that he was forced to call the police and dialed 911.

The police responded quickly, and our client explained the situation. The police went next door to talk to the neighbor. The neighbor’s version of the story was that our client was constantly harassing him. The police returned to our client’s house and said, “Look, he’s been drinking, we’ve had a talk with him, and we’ve told him to just ignore you, and you please ignore him.”

For half an hour, things were OK. Then the power went off again, and rocks started pelting the house, creating a drum concert on the tin roof of our client’s storage shed. Our client called the police again.

Before they arrived, our client smelled gasoline by the door leading to his garage. As he went outside to check, he heard the police pull up and saw them handcuff his neighbor handcuffed and push him into the police car. It turns out the neighbor had poured gasoline around the garage and tried to set it on fire. The words “Helter Skelter” were written on our client’s front door in big red letters.

The police advised our client that his neighbor had a gun in his back pocket and the officers had found weapons in his house. When our client found out the neighbor would probably be released from jail in 3-4 hours, he and his wife decided to spend the night at a hotel.

Needless to say, our client didn’t want to live next door to his crazy neighbor any longer. But a seller has a duty to disclose all material facts that might affect a purchaser’s willingness to buy a home or the amount the buyer is willing to pay. This includes the bad reputation of a seller’s neighbor.

In the 1992 Alexander vs. McKnight case, the court held that sellers have to disclose their neighbor’s “pattern of offensive and noxious activities,” including operation of noisy equipment, late-night basketball games, and a plethora of cars parked on the property, even if the conduct had stopped.

Disclosures Required By Law

One question all sellers are required by law to answer on the Real Estate Transfer Disclosure Statement is whether there are any neighborhood noise problems or other nuisances. If the answer is “yes,” the seller must explain that answer in detail.

In addition to the Transfer Disclosure Statement, sellers have to fill out statewide disclosure forms and a form developed by one of the boards Ron formally represented that pose additional questions regarding bad neighbors, including nuisances and threatened or actual lawsuits, and require detailed explanations of the problems identified. Here are the some of the questions sellers must answer:

Are you (seller) aware of past, present, pending or threatened lawsuits

Are you (seller) aware of neighborhood noise, nuisance, or other problems from sources such as, but not limited to, the following: neighbors

Are you (seller) aware of any past or present known material facts or other significant items affecting the value or desirability of the property not otherwise disclosed to buyer

These addenda are given to prospective buyers to put them on notice about possible neighborhood problems. It is then up to the buyers if they want to purchase the property knowing that it comes with past and/or future neighbor trouble.

It is too bad that our client, the innocent party in this dispute, had to hire a lawyer to prepare this documentation, which he now has to give to prospective purchasers. However, he was wise to seek legal advice to ensure that he fulfilled his legal obligation to make a full disclosure to prospective buyers.

Given the nature of the disclosure forms now required by both the state of California and many real estate groups, including the California Real Estate Association, the seller is required in many instances to be more than forthright with regard to prospective buyers. Full and complete disclosures must be made. If not, the buyer will move in, and one of the first things that will happen is that a neighbor will tell them about all of the problems, and then the buyer will sue the seller for failing to make complete and adequate disclosures. If you want to be rid of your bad neighbor problem, disclose, disclose, disclose!