What must be disclosed in a commercial real estate sale?

The sale of real estate property can be a profitable venture, but the law requires sellers to make several disclosures to their buyers. If a seller fails to disclose any of these details, the buyer could take legal action against you. Knowing the required disclosures for commercial property sales can be an essential step in protecting yourself against future legal issues.

What real estate disclosures does California law require?

California law requires commercial real estate sellers to disclose information that may impact how desirable a buyer finds a piece of property. These real estate disclosures for commercial properties include:

  • Whether it would be advisable for the buyer to obtain title insurance
  • The presence of a nearby airport
  • If the property’s location puts it at risk of flooding or earthquake damage
  • Any releases of hazardous materials on the site
  • Whether the property has been the site of a death in the past three years
  • The condition of buildings, utility systems and other structures on the property

Under California law, these guidelines for commercial and industrial property also apply to vacant property.

What is the risk of failing to disclose this information?

Knowingly failing to disclose a defect in your property can put sellers at risk of a lawsuit. For a buyer to take legal action for failure to disclose, they must have had the property inspected and the inspector must have failed to identify these issues.

If the buyer is successful in their lawsuit, the court may order the seller to pay damages that cover the cost of repairing the issue, additional funds to address the decrease in property value and punitive damages. The court may also rescind the contract in some cases.

If you are a seller navigating required disclosure or a buyer concerned about the impact that these disclosures may have on your purchase, discuss your contract with an experienced real estate lawyer. They can help you navigate California law and protect yourself from future issues.