Facts: A buyer entered into a written agreement to purchase a mixed-use property containing a commercial building and two residential units. The purchase agreement required the seller to provide the buyer with all disclosures mandated by law. The seller did not deliver the Transfer Disclosure Statement (TDS), and the buyer refused to close escrow.

Claim: The seller sought money losses from the buyer for breach of the agreement, claiming the seller was not required to provide the TDS for a mixed-use property and, thus, the buyer violated the agreement by not closing escrow.

Counter claim: The buyer claimed they were not required to close escrow since the seller did not perform under the agreement by not providing the TDS, which is required for the mixed-use property as it contains two residential units.

Holding: A California court of appeals held the buyer was not liable for breaching the agreement since the seller failed to perform under the agreement by not providing the TDS on the mixed-use property, which is required on all property containing one-to-four residential units. [Richman v. Hartley (March 20, 2014)_CA4th_]

 

Editor’s note – Here, the seller attempted to use the mixed-use status of the property as a way to avoid delivery of the mandated transfer disclosure statement (TDS), also known as a condition of property disclosure. However, California Civil Code §1102 clearly requires the seller to timely deliver a TDS on all property “improved with or consisting of not less than one nor more than four dewelling units” (bolds added for emphasis). [See first tuesday Form 304]