Lenders who are dealing with borrowers in default on a fix & flip property may ultimately take back the property after foreclosure. As with any real estate transaction, there are potential pitfalls for the lender if the fix & flip borrower walks away from the project, leaving the lender to address any remaining issues.

Lenders must be mindful of the potential liabilities associated with taking back such a property in California, including a 10-year liability for construction defects in fix-and-flip properties. Some of the key takeaways for lenders include:

• Understand Your Liability: As the lender, you must know the laws regarding defects in properties that you take back because of a foreclosure.

• Ten-Year Statute: In California, there is a 10-year statute that requires the party that assumes ownership of a project to assume liability for latent construction defects in the project.

• Seek Professional Help: Consult a legal expert to review any contracts you have with a borrower as early as possible and to identify your potential liabilities with any fix & flip properties that you may take back.

You can read this full article at: https://geracilawfirm.com/understanding-lender-liability-avoid-californias-10-year-liability-for-construction-defects-in-fix-and-flip-properties/(subscription required)

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