Articles Posted in Apartment Buildings

DramaticSFskyline2017Author: Staff

Buying real estate is a risky venture for investors, with buyers betting on the property increasing in value or producing a revenue stream through rental. Buyers also take various chances regarding unknown defects in the property’s title, or defects in the property itself. Researching potential defects is a critical part of any California real estate investment. California law requires sellers of certain types of real estate to make a variety of disclosures to buyers, in the interest of giving prospective buyers as much relevant information as possible. Most of these disclosure rules apply to residential real property. Some investment properties, such as rental houses, are subject to residential real estate disclosure requirements. The sale of an apartment building with more than four dwelling units, however, is not necessarily subject to those rules. It is, however, subject to other disclosure requirements, including known defects or hazards, particularly environmental hazards. California also requires disclosure of certain earthquake risks.

Residential vs. Commercial Property

Residential properties, defined as properties with one to four dwelling units, are subject to a substantial number of disclosure requirements in California. Residential rental properties can appear to fall into both categories, since they are residential for tenants, but commercial for owners. Rental houses, duplexes, and other small structures generally fall under the “residential” category. Sellers must follow the residential disclosure guidelines, even if the buyer is another investor. Larger apartment buildings, on the other hand, are not necessarily subject to those requirements.

Common Law Disclosure Requirements

A 1963 decision by a California appellate court, Lingsch v. Savage, establishes that sellers of commercial property have a duty to disclose any facts known to them that “materially affect[] the value or desirability of the property.” Failure to do so with the intention of inducing someone to purchase a property can result in civil liability for fraud.
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apartment buildingAuthor: Staff

Apartment buildings can be an excellent investment for California real estate investors. Factors like the size and style of the building, the type of units available, and of course, the location are all important. An apartment building owner can manage the property directly or delegate this role to a manager, but liability for breaches of a lease agreement, or for violations of California landlord-tenant law, will ultimately fall on the owner rather than the manager. California apartment building owners’ legal obligations include making accommodations for accessibility and, under a new law that applies to new construction, providing individual water meters or submetering for each unit. Real estate investors looking into apartment buildings should be aware of the financial risks and legal obligations.

What Is an “Apartment Building” Under California Law?