Seller Didn’t Disclose a Defect? What California Home Buyers Can Do

You just moved into your new home, and now you’re finding problems the seller never mentioned — a leaky roof, a cracked foundation, an addition that was never permitted. You’re not imagining it, and you’re not out of options.

Sellers in California have a legal duty to disclose

Under California law, sellers of residential real property must disclose known material facts that affect the value or desirability of the home. This isn’t just a courtesy — it’s a legal obligation set out in the Transfer Disclosure Statement (TDS) and Seller Property Questionnaire (SPQ), and reinforced by case law going back to Lingsch v. Savage (1963) 213 Cal.App.2d 729, which held that sellers and their agents must disclose facts they know that a buyer couldn’t reasonably discover on their own.

A “material fact” is anything that would affect what a reasonable buyer is willing to pay, or whether they’d buy the house at all. Prior water damage, an unpermitted room addition, foundation settling, mold, a leaking roof that was “fixed” without a permit — these are the kinds of things sellers are supposed to tell you about.

What counts as a violation

You may have a claim if:

• The seller knew about a defect and didn’t disclose it on the TDS or SPQ
• The seller actively covered up or minimized a known problem
• Your real estate agent knew, or should have known, and stayed silent
• The seller made a false statement about the property’s condition, in writing or verbally

It doesn’t matter if the seller says “I didn’t know” — if there’s evidence they should have known (prior repair invoices, permit records, neighbor statements, prior disclosure history), that can still support a claim.

An “as-is” clause in your purchase agreement does not change this. California courts have squarely rejected the idea that selling a home “as-is” excuses a seller from disclosing known defects: in Shapiro v. Sutherland (1998) 64 Cal.App.4th 1534, the court held that where a seller actively misrepresents or fails to disclose the true condition of the property, an as-is provision is ineffective to relieve the seller of liability. If your agent or the seller told you the as-is language means you have no recourse, that is not correct.

One important nuance: the duty is to disclose the material fact itself, not necessarily every possible downstream consequence of it. In Assilzadeh v. California Federal Bank (2000) 82 Cal.App.4th 399, the court held that a seller who disclosed the existence of a known issue — there, pending construction defect litigation — had satisfied the disclosure duty, even without spelling out every way that issue might affect the property’s value going forward. In other words, if the seller told you something was wrong and you didn’t ask further questions or investigate, that can cut against a nondisclosure claim. But if the seller said nothing at all, or actively minimized what they knew, that is a very different case — and the kind of case this page is about.

How do you prove the seller knew?

This is the question that decides most nondisclosure cases, and it is almost never answered by anything the seller says. It is answered by the paper the transaction left behind. The evidence that carries these claims is usually some combination of:

• The prior listing. The MLS record from when the seller themselves bought the house — and its photographs — often shows the exact condition they later failed to disclose. A photograph taken before a cosmetic repair is very hard to argue with.
• The seller’s own disclosure documents from when they bought. If the defect was disclosed to them, they knew about it.
• Permit records. The city or county building department will show what was permitted, what was not, and when.
• Repair invoices and contractor records. A patch on a foundation or a roof leaves a trail — invoices, warranties, sometimes a mechanic’s lien.
• Insurance claim history. A prior water or fire claim on the property is a record the seller created themselves.
• Neighbors. In a case about recurring flooding, a chronic drainage problem, or a nuisance next door, the people who have lived on that street for twenty years often know more than anyone in the transaction.
• The agents’ files. Agents keep notes, emails and texts, and in litigation those are discoverable.

You do not need a confession. Circumstantial evidence that the seller must have known is enough to put the question in front of a jury — and in practice, a well-documented demand letter that sets out three or four of these sources resolves a fair number of these matters before anything is ever filed.

Unpermitted work is a category of its own

Unpermitted additions and conversions are among the most common undisclosed defects in California and among the most expensive to inherit. The Transfer Disclosure Statement asks the seller directly about room additions, structural modifications and other alterations or repairs made without the necessary permits. A seller who answers no to that question knowing an addition was built without a permit has made a false statement on a statutory form — which is a considerably stronger starting position than a vague dispute about what someone remembered.

The cost is rarely just the construction. You may be looking at a retroactive permit application, work that has to be opened up for inspection or removed altogether, a converted garage that a city requires to be converted back, an insurer or lender that treats the square footage differently from the listing, and an appraisal that never supported the price you paid in the first place. See Unpermitted Additions and Conversions: What Buyers Need to Know.

What you can recover

California uses the “out-of-pocket” measure of damages for real estate fraud under Civil Code section 3343(a). In plain terms: you can recover the difference between what you paid and what the property was actually worth given the undisclosed defect, plus reasonable costs you incurred because of it — repair costs, and in some cases loss of use of the property. If the seller’s conduct was intentional or especially deceptive, punitive damages may also be available under Civil Code section 3294.

How long you have — and the two-year trap

Three different clocks can run on the same set of facts, and the shortest one is the one most buyers never hear about until it has already expired.

• Fraud or concealment against the seller — three years. Code of Civil Procedure section 338(d). The clock runs from when you discovered the facts, or reasonably should have discovered them, rather than automatically from the closing date.
• Breach of the written purchase agreement — four years. Code of Civil Procedure section 337.
• A claim against a real estate broker or salesperson under Civil Code section 2079 — two years, with no discovery rule to rescue you. Civil Code section 2079.4 provides that in no event shall the time for commencement of a legal action for breach of the duty imposed by that article exceed two years from the date of possession — which means whichever comes first of recordation, close of escrow, or occupancy.

That last one is the trap. The section 2079 duty is the agent’s duty to conduct a reasonably competent visual inspection of the property and disclose what it turns up. Where a claim against the agent rests on that duty, the two years runs from the day you took possession — whether or not you had any way of knowing the defect existed. It is entirely possible to discover a serious problem in your third year of ownership and still have a live claim against the seller alongside a dead one against the agent who should have spotted it.

Not every claim against an agent is a section 2079 claim. Breach of fiduciary duty or fraud by your own agent is governed by its own limitations period, and the discovery rule can apply there. But which category your facts fall into is exactly the sort of question worth an opinion early rather than late. For more on claims against your own agent, see Can You Sue Your Own Real Estate Agent?.

What to do right now

1. Don’t start repairs yet — document the defect first with photos and, ideally, a contractor or inspector report before any work begins.
2. Pull your disclosure documents — the TDS, SPQ, and Real Estate Purchase Agreement. Compare what was disclosed against what you’re now finding.
3. Look for a paper trail — permit records with the county, prior listing history, neighbor accounts, anything suggesting the seller knew.
4. Work out which clock you are on — see the deadlines above. The three-year fraud period is the one people have usually heard of; the two-year cap on section 2079 claims against an agent is the one that quietly expires first. Both can start running sooner than you expect, so get an opinion as soon as you suspect something was hidden from you.

How Jimmy can help

Jimmy Nguyen is a California real estate attorney, licensed real estate broker, and CAR-panel mediator who has worked inside the real estate industry for over 20 years — he knows both sides of the transaction. If you believe a seller or agent hid something from you, reach out for a free case evaluation.

Jimmy handles these matters as part of his California seller nondisclosure and agent misconduct practice. If the seller is also refusing to release your deposit, see earnest money deposit disputes, and the real estate law FAQ answers the questions buyers ask first.

Email jimmy@lawjn.com with a short description of what happened.

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