Seller non disclosure of open code violation

[Matthew L.]

Hey there,

First time home buyer and after going into contract, we discovered there were open code violations on the garage conversion to ADU. House is in San Jose, CA. They did disclose that the inside of the ADU was not permitted, however, they did not disclose that it had open code violations. Does this merit being able to pull out of contract and collect our deposit back?

Background on the house:
1. In 2009, current home owner permitted a "shed/workstation" 

2. Post 2009, they turned it into a living space without a permit

3. In 2017, neighbor reported them and they got a code violation

4. In 2018 they attempted to apply for an ADU permit and have it legalized with the existing plan, however, since it's a living space, it did not meet the flood zone requirements. House is built on a flood zone and needed to be higher off the ground then what a "shed/workstation" needs to be

5. Post 2018, nothing has been done.  The existing 2018 permit has expired.

3-5 was not disclosed to us and we're now considering backing out because we dont want to absorb the headache that will come with getting it up to code (likely requires demo + rebuild or turning it back into a garage).  

Do you think getting deposit back will be contested? Seller realtor mentioned she was not aware of these code violations either and is reaching out to the city to find out more. Seller was definitely aware. Luckily found this while in contract and not after we closed..

Appreciate the insight!