Mario Van Peebles sold his Los Angeles condominium to Adel Bebawy; and to his alleged surprise, there was a history of mold and sloping floors. Bebawy filed suit against Van Peebles and against the Homeowners Association. In a tentative ruling by Judge Steven J. Kleifield, the Association, not Van Peebles, will be footing the bill for the repairs to Bebawy’s condo. Additionally, Judge Kleifield slapped on some civil penalties increasing the damages the Association will have to pay. Bebawy v. Van Peebles, Case No. BC410034 (2014) (tentative decision).
When selling and buying property California law dictates certain disclosures regarding the state of the property must be made by the seller to the buyer. The statutory law directs the seller to disclose, “all facts materially affecting the value or desirability of the property that [a reasonably competent and diligent] investigation would reveal.” Cal. Civ. Code § 2079. And, the seller must act in good faith; that is, the seller must act honestly in the course of the transaction. Cal Civ. Code § 1102.7. It is, however, also the responsibility of the buyer to conduct his or her own reasonable investigation of the property. See Cal. Civ. Code § 2079.5.
To assist sellers and buyers in the course of the transaction, the California legislature has provided a mandatory disclosure form to be completed by the seller. Two such disclosures that must be made are the presence of mold and whether there exist any defects in the floors. Cal. Civ. Code § 1102.6.
While California law mandates mold, including mold remediation, be disclosed, courts may be willing to overlook this disclosure if knowledge of the remediation would not deter the buyer from purchasing the property and if it did not diminish the value of the property. Van Peebles appears to have escaped liability from his failure to disclose the mold remediation, as the court found Bebawy would have bought the property regardless of the mold history and there was no proof that the remediation diminished the property value. Bebawy v. Van Peebles, Case No. BC410034 (2014) (tentative decision).
Neither does Van Peebles have to pay for the cost of the flooring repairs; however, the Association is not so lucky. The court found Van Peebles had not concealed the fact that the floors sloped, and that during the course of his own investigation, Bebawy was informed by multiple sources of the sloping. If Bebawy was aware of the sloping, why, then, is the Association on the hook for the flooring repairs?
The condo Bebawy purchased is on the first floor. Below the flooring is a concrete slab, which is community property to be maintained by the Association. Bebawy claims the failure to maintain the slab has resulted in his sloping floors. The court agreed. While the court noted the proper relief Bebawy should have sought was injunctive relief to enforce the CC&Rs against the Association, the Association was still responsible for “repairs to an owner’s unit where the damage is caused by a defect in a common area,” not including any upgrades the homeowner may install. Bebawy v. Van Peebles, Case No. BC410034 (2014) (tentative decision).
Before filing suit against Van Peebles and the Association, Bebawy had brought the defective slab issue and his flooring problems to the attention of the Association. The Association, however, proceeded to ignore the problem and selectively enforce the CC&Rs against Bebawy. The Association also failed to properly inform Bebawy of meetings, omitted items from meeting minutes, and failed to hold mandatory meetings. Finding this to be a breach of fiduciary duty, the court imposed punitive damages on the Association. The court noted, “the existence of a hostile relationship does not excuse a homeowner’s association from compliance with the ACT, bylaws, and its fiduciary duty.” Bebawy v. Van Peebles, Case No. BC410034 (2014) (tentative decision).
The Association’s own failure to maintain the common areas and its own breach of fiduciary duty resulted in the tentative result of having to pay $13,217.40 in repairs to Bebawy’s condo and an additional $13,000 for breach of duty and selective enforcement of the CC&. For other Associations, the lesson should be clear: Stay on top of the common area maintenance and do not let personal hostility affect your judgment! Enforce your CC&Rs equally and hold meetings as the governing documents and law require!
While Bebawy is not an Appellate decision, and is therefore not binding, it serves as a good lesson to Associations and their boards. For more information on how to ensure your Board can avoid liability by properly maintaining the common areas and equally enforcing the governing documents, please contact our firm today!