Q. I am a first-time homebuyer who recently purchased a condo in Aliso Viejo, Calif. I've since discovered that the community has a history of slab leak problems that was not disclosed. Prior to my purchase, a $5,000 special assessment had been discussed by the homeowners association and I now have letters documenting that the problem had been communicated to the owners prior to the sale.

The sellers of the unit requested a 30-day escrow and I had no communication until the 29th day, when the escrow company had me come in and sign the paperwork. They informed me that the property was mine the next day.

The paperwork shows that the "minutes of the Homeowner's Meetings were requested, but not supplied." I did not even notice that and I wasn't worried about any problems, because my agent had assured me that the complex had no problems.

My association fees have already risen due to this problem and I am forced to pay $5,000. I've been told that others who have sold their properties had to disclose this problem and had to lower their selling prices. I paid full price and requested full disclosure. Do I have any recourse? Who should have made sure that I received a copy of the minutes and time to review them?

A. You have a case against the seller for not disclosing the problems.

Review your purchase agreement documents and see if there is an arbitration clause. All parties to the purchase including the seller, the agents and you are required to agree to arbitration for arbitration to be enforceable. Your agent's assurance that the complex did not have any problems is troubling.

Real estate agents cannot make such statements because they are not aware of the physical condition of a property. If the agent's misrepresentation was made to induce you to sign a purchase agreement or go through with the closing, this is a violation of the license law. You could file a complaint with the agent's broker and the California Department of Real Estate. A publication entitled "Disclosure in Real Estate Transactions" is available online from the California Department of Real Estate. The Web site is www.dre.cahwnet.gov and the publication can be found in the Consumers section under protection.

Q. I Just recently completed a 1031 exchange on investment property and deferred $115,000 in capital gains to the new investment property. Can I decide at a later date to change it to my personal residence, reside there for two years and then sell the property under the personal residence rule ($500,000 exempt rule)? I assume that I would still have to pay the capital gains on the original $115,000 that I deferred to the subject property. If this is possible, are there any special tax reporting rules other than reporting and paying the capital gains as you would any normal capital gains?

A. Yes this is possible. When you sold the first investment property and purchased another investment property you were able to defer taxes on the profit by buying another investment property. In order to protect this deferral, you should maintain the property as investment property for at least two years. There is not a time requirement for the holding period, but I suspect that if your intention was perceived by the IRS as a plan to avoid taxes by immediately converting the property to a personal residence, the 1031 tax-deferred exchange could be disallowed. Also, when the property is converted to a personal residence, you will have to pay a 25 percent recapture on the depreciation that you have taken.

The single-family exemption rule you cite allows a single taxpayer to sell a property with a profit up to $250,000 and married couples to earn a profit of up to $500,000 on the sale of a personal residence without paying taxes on the profit. In order to qualify the property must have been occupied as a primary residence for at least two out of the last five years.