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Reed v. King - 145 Cal. App. 3d 261, 193 Cal. Rptr. 130 (1983)

Rule:

A seller of real property has a duty to disclose: where the seller knows of facts materially affecting the value or desirability of the property which are known or accessible only to him and also knows that such facts are not known to, or within the reach of the diligent attention and observation of the buyer, the seller is under a duty to disclose them to the buyer. The ancient maxim caveat emptor, let the buyer beware, has little or no application to California real estate transactions.

Facts:

Plaintiff homebuyer filed a complaint against defendants, real estate agents, seeking rescission of the real estate contract after she learned that a woman and her four children had been murdered in the home 10 years earlier and that, although the owner and his real estate agents knew about the murders and knew the event materially affected the market value of the house, they did not disclose the murders to the homebuyer. The trial court sustained defendant' 'demurrers to the complaint on the ground it did not state a cause of action. The homebuyer declined an offer of leave to amend and the trial court entered a judgment of dismissal. Plaintiff homebuyer appealed.

Issue:

Was a homebuyer entitled to rescission of a contract on the ground that the defendant failed to disclose that a multiple murder occurred in the property?

Answer:

Yes.

Conclusion:

The court found that the failure of defendant real estate agents to disclose physical defects and legal impediments to the use of the real property were material to the contract. The court held that there was no basis for making the duty to disclose turn on the character of the information. The court appellate reversed because the fact of the murders may have had a quantifiable effect on the market value of the real estate, which plaintiff was entitled to prove.

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