Saunders

Factual and Procedural Background

In 1987, Mr. and Mrs. Saunders purchased a house from Mr. and Mrs. Taylor for $87,500. Prior to the close of escrow, the Taylors executed and delivered a real estate transfer disclosure statement to the Saunderses as required by Civil Code section 1102.2 et seq. That disclosure form asked, inter alia, whether the sellers were aware of any “[rjoom additions, structural modifications, or other alterations or repairs made without necessary permits” or which were “not in compliance with building codes.” (§ 1102.6.) The Taylors answered “no” to both questions.

In October of 1990, the Saunderses had the house appraised in order to obtain a home improvement loan. The appraiser told them that he could not locate any building permits for a family room which had been added by enclosing a patio. The Saunderses thereafter confirmed with their city’s department of building and safety that there were no building permits issued either for the patio conversion or for several other improvements. The building inspector also informed them that the family room and various other alterations did not comply with applicable building codes. Contractors…