Facts: A local government contracted with a developer to build and qualify low- to moderate-income buyers for an affordable housing complex. The total allowable purchase price per unit was capped. Under the affordable housing program, the developer was to approve qualifying purchase paperwork from potential buyers and submit the approved contract to the local government to issue a qualifying compliance certificate. A buyer, whose income exceeded the program threshold, submitted a purchase offer exceeding program caps. The developer did not disclose the complex was designated as affordable housing. The developer accepted the offer, misrepresented the buyer’s income in the purchase application and sent it to the local government. The local government erroneously issued the buyer a compliance certificate based on the misrepresented income provided by the developer. The developer later went bankrupt, after which the buyer discovered the house was in an affordable housing project. The buyer forfeited the property and the local government reimbursed the buyer for the property’s cost.
Claim: The buyer sought further money losses from the local government, claiming the local government failed to disclose the housing and income restrictions to the buyer, since the buyer did not qualify and paid a purchase price in excess of the affordable housing threshold.
Counter claim: The local government claimed it was not liable for the buyer’s money losses since it was the developer who erroneously reported the buyer’s income for the compliance certificate, making the local government immune from prosecution as a public entity.
Holding: A California court of appeals held the local government was not liable for the buyer’s further money losses since it was not the local government’s responsibility to acquire or verify the buyers’ income information, merely to issue compliance certificates based on the contract approved by the developer. [Tuthill v. City of San Buenaventura (February 12, 2014) _CA4th_]