Imagine you are the CEO of a celebrated tech company that has taken steps to change the world. You want a house in the heart of San Francisco that reflects your newly-minted celebrity. Then, this property catches your eye. It's in the upscale Russian Hill neighborhood, right next to the famously crooked Lombard Street.
It's got everything a tech CEO could wish for, including a "Batcave" garage for your Tesla (we're assuming he drives a Tesla) and eco-friendly everything. It's obscenely large for the heart of San Francisco, and you can get it for the bargain price of $27 million. Sounds perfect, right?
Open-AI CEO Sam Altman thought so. Unfortunately, even the well-off are not always able to anticipate the problems of home ownership. Recently, Altman filed a lawsuit against real estate developer Troon Pacific and others associated with the development project.
Altman claims that there are myriad problems resulting from "shoddy workmanship," such as an unconnected drainage pipe that dumped raw sewage on the grounds. He also claims the infinity pool leaks and will take millions to fix, and that contractors who weren't paid on time retaliated by leaving debris and garbage all around the property.
Of course, these are all allegations, and ultimately, a jury must decide who is at fault and for how much if it goes to trial. But what do the rest of us have for options if our dream home isn't all it was advertised to be?
Taking the Home Inspection Seriously
The first option is preventative. Buying a home is exciting, nerve-wracking, and tedious all at the same time. Amid all of the offers, counter-offers, and paperwork, viewing the home inspection as a formality can be easy. By this time, the house is almost within reach. And if the house were falling apart, you'd notice, right?
Be careful to avoid this trap and take the home inspection seriously. Especially for "flipped" properties, contractors are incentivized to make as many cosmetic changes as possible and ignore non-essential repairs. The result is a home that looks good but may need more work than first meets the eye. Having a home inspector you trust (or two) can help you spot any potential issues that aren't obvious.
Working With the Contractor
A lawsuit isn't anyone's first choice. The contractor may be willing to address issues without resorting to a lawsuit. Contractors who make a habit of bad workmanship tend to get bad reviews and it hurts their business.
Sometimes, simply speaking up and laying out clear instructions for what you need can resolve the issue, particularly if you spot the issues right away. You also, of course, have the right to condition your offer on certain repairs getting done before everything is finalized.
Filing a Lawsuit
You don't have to be a tech CEO in a multi-million dollar property for a lawsuit to be feasible. A home is usually your most valuable and important asset, and serious misrepresentations about the property can have devastating financial consequences. That means a lawsuit may be worth the time and effort.
Sure, it can be expensive and time-consuming, but it is for contractors, too, so there may be some incentive for all parties to settle out-of-court.
However, keep in mind that you must have something to sue over. This isn't always as clear-cut as you might think. For example, some sellers will specify in the contract that you are buying the property "as is", which makes it harder to bring a lawsuit for deficiencies. That being said, here are a couple of potential causes of action to sue the seller/developer:
- Breach of contract. Did the seller/developer make promises in the contract as to the workmanship or features that are not true? If so, it is a breach of contract.
- Failure to disclose. State laws often require sellers to disclose notable defects in the property. These vary by state, so you'll need to look at state laws to see what exactly sellers are required to disclose. If they failed to, you have a valid claim for a lawsuit. A good example is hidden water damage or mold - the seller generally has to disclose that even if the damage is covered up.
- Breach of implied covenant of good faith and fair dealing. This is a sort of catchall claim that means that even if it's not written in the purchase agreement, state law requires that both parties to a contract must operate in "good faith" and deal fairly with the other party when performing the contract.
Other options include claims of fraud and negligence. However, whether a lawsuit is worth it and whether you have a strong case will depend on the circumstances, which is why it's a good idea to talk to a lawyer before deciding anything for sure. Hopefully, you won't experience something similar with your dream home, but if you do, there may be legal options available.
Related Resources
- Home Buying Guide (FindLaw's Learn About the Law)
- Construction Defects (FindLaw's Learn About the Law)
- Landmark Realtor Settlement Means Buying a Home Will Change (FindLaw's Law and Daily Life)
