Q: If the seller of a rental property overstates rental income of a property to a buyer what damages are available?
This is somewhat of a hypothetical, but say a rental property is sold for $100,000. Seller represents to Buyer that the rental property generates $30,000 in income per year. Buyer finds out after the sale that the rental property actually generated $15,000 in income per year. After accounting for the difference in income the fair market value of the rental property is $75,000. The sale of the property will have occurred 2 years prior to the date of trial.
What damages are available to Buyer assuming 1) Buyer reasonably relied on Seller's representation 2) The income generated is 100% profit 3) The fair market value is not in dispute.
A) The difference in price paid vs the fair market value ($25,000)
B) The difference in price paid vs the fair market value plus the 2 years of lost profits ($25,000 + $30,000)
C) Other
The main question is to what extent California Civil Code 3343 allows the availability of lost profits, or if another code is more applicable.
A:
So your question is directed at what damages you can recover for fraud or negligent misrepresentation in a real estate sales transaction, you are not concerned at all with proving that there was an actionable misrepresentation. The answer to this question as you posed it is all of the above. You may even be entitled to attorneys fees. BUT you have to look at the escrow instructions and the sales agreement to see if it is integrated, and has statements that "the representations on the agreement supersede all prior representations, written or oral", because if that is in the agreement and the agreement does not say $30,000 annual rent, you could be out of luck. Your proof of damages seems to be the least difficult problem here, the proof of actionable fraud is the biggest problem. What written documentation of the rental income was provided to you before the sale?
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