New House, Broken Sewer Line, Legal Problem, What to do ?

Buying & Selling Real Estate
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New House, Broken Sewer Line, Legal Problem, What to do ?

Tom La Rosa
Long Beach, CA · Member since 2014 · 35 posts · 1 vote

To make a long story short . . . .

I bought a house 2 months ago, I just had the sewer line video scoped. There is a break in it, with tree roots inside.

It has become apparent the previous owner knew about it and did not disclose it and is now lying about it. 

Without getting into the drama, I can prove they knew about it.

My Real Estate Agent contacted theirs and the previous owner may not co-operate.

Is this a small claims court issue, a real estate lawyer issue ? What would be my next step ?

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MJ Barnett
Real Estate Agent · Burbank, CA · Member since 2015 · 72 posts · 22 votes
10y

If you can prove the Seller's new about it, then your next step is to hire an attorney who can send a letter that you are looking to sue them for the cost of repairs by XYZ company and your legal fees if you want to add them in. Send a copy to both Agents as well and see if they can negotiate with the old Seller to pay for the repairs. Many times that letter and bringing in the Agents can create movement on the old Owner's part to pay for the repairs.

MJ

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  • Scott Carder
    Investor · Owasso, OK · Member since 2013 · 166 posts · 90 votes
    10y

    Main problem is the cost to pursue it may be equal to or greater than the fix. If its just one spot a plumber can dig it up and repair it for a grand. If its a total line that's a different story.

    1Reply
  • MJ Barnett
    Real Estate Agent · Burbank, CA · Member since 2015 · 72 posts · 22 votes
    10y

    If you can prove the Seller's new about it, then your next step is to hire an attorney who can send a letter that you are looking to sue them for the cost of repairs by XYZ company and your legal fees if you want to add them in. Send a copy to both Agents as well and see if they can negotiate with the old Seller to pay for the repairs. Many times that letter and bringing in the Agents can create movement on the old Owner's part to pay for the repairs.

    MJ

    2Reply
  • Dustin KircherPro Member
    Flipper/Rehabber · San Diego, CA · Member since 2015 · 22 posts · 15 votes
    10y

    I agree with @MJ Barnett, however to maybe save some of the costs I would first draft up the letter of intent and maybe then have an attorney send on your behalf on there letter head or you send it. I have been to small claims a few times and never lost. The key is to have a well documented binder full of evidence. That being said it is not a quick process and make sure to go to the county website on the procedures to take someone to small claims.

    In this case it would be a small claims deal. Also if you purchased the home on the California Residential Purchase Agreement then most likely you signed Pg8 Section 22 Item B which is the Arbitration clause which means you will need a neutral party to mediate the issue.

    However I agree with @Scott Carder if the repair is not very expensive 1k to 2k it might be easier and less stressful to just fix it and let it go.

    2Reply
  • Account Closed
    Real Estate Agent · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
    10y

    what signs made you check the sewer line? WHY DIDit take two months? Did you have a home inspection?  What proof do you have that the previous owner knew of the problem. The previous posts make sense. You may only be limited to arbitration and the cost of repair may not be worth it

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    10y

    "I just had the sewer line video scoped."

    Why wasn't the sewer line scoped as part of your normal property buying inspection before you closed?

    What did the sellers disclosure say??

    You would have to prove in court that they seller "knowingly and willingly" concealed a material defect. Hard to prove on something the seller can't even physical see without a special test.

    Courts generally hold that "buyers have a right to their own inquiry". This means you could have had the sewer line scoped prior to purchase which would likely have shown a tree root issue. You could have negotiated that fact or not have bought the property so you wouldn't be materially damaged like you are now.

    Often buyers never want to spend money on reports and they roll the dice that the property will be okay. After the sale something happens and they now look to the seller to fix the problem free of charge.

    No legal advice given. 

    What are you going to say to a judge in court when they ask " Why sir did you not pay to have the sewer line scoped prior to buying the property which would have alerted you to this issue?".

    Anything can happen in court. Wouldn't pay an attorney any upfront money and they get paid when they win. If they will not take the case then you know the chances are weak. Anytime something is a slam dunk some attorneys will put time in to get paid later. If it looks 50/50 or a long shot they will want retainers upfront.

    The honest attorneys will tell you that you are fighting a losing battle and not to go to court and work it out another way. The scrupulous ones will tell you anything you want to hear to take thousand of dollars or more and make it seem like there is no way you are going to lose. Lot's of money spent down the road the attorney says sorry but best they could do. They make lot's of money but you get  a bigger loss and a headache.

    Years ago I had a much bigger issue on a purchase come up with a larger property. The attorney said I could sue the seller for fraud and take them to court but even with a judgment I might never collect or it would take years and even then they might file BK and I get nothing.

    To litigate it would take 6 months to 1 year. The defendant could be ordered to pay all my attorneys fees etc. but the money may never appear.

    The attorney said the best thing to do was not go through the stress and time for 1 year and instead focus on energies elsewhere. The hit wasn't too bad in the low 5 figures compared to all that happened. In that years time I made way,way more return than if most of my time was spent suing this person. Some will do it just to get back at the person. Smart investors know when to walk away from an emotional payoff when it will take up a lot of  time and cost them more money.   

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  • Tom La Rosa
    OP
    Long Beach, CA · Member since 2014 · 35 posts · 1 vote
    10y

    Thanks everyone, I dont want to get too into the story. 

    But, while we were in escrow, some green spay paint appeared on the ground marking a location. Seller tells me it was from the gas co. OK

    2 days in to moving in, toilet backs up and overflows, plumber comes, snakes tree roots out, says home warranty wont cover it because its an existing problem. Plumber recommends videoing the sewer line. Drains work OK at the moment.

    In CA, sewer line inspection is not part of a normal home inspection, though it should be, and I will make them part of my routine in the future.

    It took me a while to do my video inspection due to prepping a rental property (my first house ), moving,  prepping the new house, working overtime , plumbers flaking out, etc.

    When I finally get my inspection, it turns out the green spray paint marks the exact location of the sewer line break.

    My agent knew what was going on from the beginning, knew I was suspicious, is now trying to negotiate with the sellers agent and seller. The seller still denies everything.

    I wrote pretty much my last letter, making my case, and because of the new year weekend, dont expect a response until next week.

    So, thats what this post is about, what do I do now ?

    @Joel Owens, @Account Closed, @Dustin Kircher,

    @MJ Barnett,@Scott Carder

    Thanks for taking the time to write.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Tom La Rosa  I voted for @Dustin Kircher  post because like our contracts here in Oregon .. if you used a CA resi purchase agreement that is used by local agents there is a mandatory mediation clause.. so that's were you go.. Not sure if you can skip that and go to small claims though... I have never lost at small claims either.. but have been to mediation a number of times over the years .. and basically its these issues that everyone said we should have known about but did not.

    I have also seen these successfully turned over to E and O carrier and they will just pay them straight away as a new sewer line is probably less than 5k.. and that's usually the agents deductible and so the agents end up paying it.

    I have not brokered in CA in years but I have been buying IN Sacramento for 2 years and the disclosure docs are very thorough much more so than most any other jurisdiction that I have bought and sold in throughout the US... One of them requires the agent to do a walk through and look see and state if they see anything that should be noted.

    I never did sewer scopes in CA either.  but up here in Oregon with our tree lined streets is routine.. I have one even on a Brand new construction I am selling .. inspection is set for Tuesday and they are scoping a line that is 2 months old . Not sure why they are doing it.. because we have a 1 year guarantee on all items from CO.  And on a brand new build its either clogged or its not... so if it was clogged we would have to fix it.. but I guess the can spend the 150 bucks or so and eliminate a plug that could be inconvient.

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    10y

    Jay here in GA on new homes until you close that builder will jump when you say how high to get that puppy to closing and get their check. Afterwords they are slow as molasses fixing any issues warranty or not.

    They put all the time into closing the properties. So a buyer is smart to hold up the closing until that builder has fixed all issues. Builders can say extended warranty and all of that but many of these companies after they sell out shut down the company guaranteeing the product and do it again.

    Back in the day there would be a punch list and the builder would say they got through most of it and just close and they promise they will get to it right away. We all know how that goes. Of course some new home buyer can put up signs showing discontent with the builder that will give them bad press they do not want.

    When you are holding the builders payday you have their full attention. A mistake buyers make is assuming new builds there will be nothing wrong with them. Many older houses are constructed way better than the stuff thrown up today. A new house you need to inspect everything. Leave nothing to chance if you can as a buyer afford the inspections.    

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  • Manolo D.
    Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
    10y
    Jay Hinrichs Don't they understand the guarantee and warranty builders issue? Or did they have a bad experience before, that the builder didn't care much about his reputation and took them 3 months to check on a bad leak? Does developers require hydro tests as part of the permit sign-offs?
    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Joel Owens  @Manolo D.

    Joel every new home I have built in the last 4 years in Oregon there has been a home inspection just like a used home.. and a punch list is always created.. we embrace it. as our subs of course miss stuff and we get to hammer them to come back and fix.

    your correct some builders cut and run... not our style.. IN Charleston were I am building we have home inspections as well..

    what we do in our business is we give them a post closing document that spells out the warranty.   Any thing urgent we get right on it.. But that really does not happen in our markets as our sub trades are some of the best around.. Its not GA starter housing construction which I have been through many and they are as cheaply built as you can humanly do..

    We have them make list of cosmetic stuff nail pops etc and at month 11 they are to call us and we go in and do any cosmetics which is generally paint related and our subs know they will do that as part of the contract.  

    Its key to keep a good team of subs.  Our labor pool is VASTLY different than in the south.

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  • Manolo D.
    Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
    10y

    @Jay Hinrichs I don't see any difference with my tenant improvements on governmental buildings, we always have a punchlist.

    @Joel Owens Say a builder builts 60 houses, then just to escape warranty/guarantee, the close shop and open up another company to build another 70. How does experience get "carried over" to the new company? How does a lender vet the new company its capabilities, it being not yet 1 year old and no tax returna yet?

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Manolo D. @Joel Owens   Manolo  Joel is correct.. this happens in the new home building industry quite frequently.  Many times the principals just get a straw man for the licnese

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  • Manolo D.
    Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
    10y

    @Jay Hinrichs I think I saw it happen, a few months ago, I got invited to bid on open trade for a 56 row houses in 4 phases. I rendered my bid on 5 trades. When I was vetting the builder, I found out that their comapny is relatively new and license is too, further research gives me the impression that they had an almost similar name but closed shop a year before. They didn't incorporate my payment terms so I stepped out. Do your subs have a go to lender to bridge the weekly pay while waiting for the builder paychecks? How does it work? What's the loan called?

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Manolo D.  our subs can carry the jobs. I am not aware of them getting accounts receivable financing.. our biggest supplier is lumber and its a huge company Parr

    Our monthly draws are about 500k spread between many subs.. so not to much to carry for all the individual subs... but they want their check on the 10th and if you don't pay them they leave LOL.

    Also in Oregon properly done material man leins are super leins they jump ahead of the bank or any other creditor except property taxs.. so subs who have the brain power to send pre lien notices in accordance with the law .. they are going to get paid one way or another its really quite a great place to be a sub in that regard..

    But in 08 09 p;robably 80% of all builders here filed BK so that wiped out many of htem and of course a lot of subs are not bright enough to protect their interests..

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  • Zach Fairfield
    Investor · Portland, OR · Member since 2015 · 40 posts · 13 votes
    10y
    Hey all so on the topic but also off the topic slightly. I have been doing some temp work in the sewer line replacement business. I would defiantly suggest to investigate further into the damage of the sewer line it self. As it was said it could be a 1000 fix or could need a new main line put it which worst case scenario they need to dig and trench the entire thing. And the only way they know is by doing the repair and if it fails they have to go all the way. So I guess a long way of saying before collecting any money for the repairs have them done and know the entire cost. And Jay Hinrichs the main reason I would see in scoping a new sewer line like that is it is very common to get what they call a belly in a sewer line which is where the ground underneath sinks in one area causing essentially a low spot and can be very common due the so much change in the ground on a new construction and only wound take one rain or some ground water.
    1Reply
  • Manolo D.
    Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
    10y

    @Jay Hinrichs That is interesting, not all subs can carry cost that much/long, but I would imagine trade lines of credits come in play, only the first step is hard though. I was given the thought that you have MM draws a month, lol. Lumber is always the biggest ticket, concrete should come second. Do you carry major material tickets such as lumber or is it better to just paper contract everything and bite the bullet on costs?

    Sometimes I find it funny that a sub threatens to file liens to my commercial jobs and never filed a prelim notice (the 20-day), and yeah, i make sure i delay their job until it passes day 21, mostly when they slip up or couldn't get the quality i need, like a level 5 finish. Always fun when they think they got an Ace and just bluff it.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Manolo D.  I have 15 new constructions going right now.. so if the average home has a draw of 30 to 40k  my draws are 500 to 600k a month.. not the multi millions.. that's not who we are.. just a smaller builder..

    Our subs have credit with their suppliers.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Zach Fairfield  I hear ya.. on this particular subdivision. the sewer taps are at the property line when we built the roads so they were scoped pressure tested prior to sign off by city .. so the run from that point to the clean out is 25 to 30 feet max... so yes I suppose you could get a belly .... but regardless I am happy for them to do all the testing inspecting they want.

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  • Manolo D.
    Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
    10y
    Jay Hinrichs Thanks for the input Jay, it makes mich more sense
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  • Manolo D.
    Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
    10y
    Jay Hinrichs Thanks Jay, makes much more sense now. 15 is still a volume builder, but I guess LA is still a different market. Gives me a good idea when the time comes. :)
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