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What constitutes commercial real estate nondisclosure fraud?

On Behalf of | Aug 8, 2022 | Real Estate Transactions |

Commercial real estate sales represent an important transaction for any business. If you are a business leader buying or selling real estate, thorough due diligence is required so that you get what you need and avoid costly litigation in the process. Fraud, however, can land you in court despite your best efforts.

Commercial real estate disclosure requirements

California does not have the same disclosure requirements for commercial property that it has for residential property. While California has specific statutes dealing with residential property, commercial property disclosure requirements are largely based upon the common law.

The common law, a term that refers to the law developed over many years of court decisions, requires all those selling commercial property to disclose any material facts that impact the property’s market value or desirability. Beyond the general common law requirement, there are limited disclosure requirements that come into play in certain situations, such as when the property is located in a flood zone, earthquake zone or high flood zone.

When does nondisclosure become fraud?

Not every nondisclosure, in violation of common law or statute, is also a fraud. Unintentional nondisclosures, for instance, would not amount to fraud. To prove fraud, the buyer must be able to show that the seller knew of the nondisclosed facts and that the seller intended to influence the buyer by not disclosing the facts.

The undisclosed facts themselves must be material and not accessible by the buyer in spite of the nondisclosure. Finally, the buyer must suffer actual damage as a result of the nondisclosure.

Although litigating a fraudulent commercial property purchase is not what you want, it may be your best option. If you need assistance, speak to an attorney who is experienced in California commercial real estate law and transactions.