Condition of Property and Required Disclosures
In California, real estate transactions are required to have certain disclosures. See e.g., California Civil Code section 1102 (“disclose any fact materially affecting the value and desirability of the property, including, but not limited to, the physical conditions of the property”). The best rule of thumb is that the seller should put themselves in the shoes of the buyer, and therefore disclose any facts that they would want to know themselves if they were purchasing the property.
Some disclosures are included in the purchase contract, but most disclosures are not included in the contract or even attached to the contract. Rather, most disclosures are simply provided sufficiently in advance of close of escrow (the standard contract gives the seller 7-days after the contract is signed to provide the disclosures; but most sellers like to provide disclosures at the time of signing the contract).
Generally, the most important disclosures needed from the Seller are the ones relating to the physical condition of the property. In California, this is the 3-page Real Estate Transfer Disclosure Statement (TDS) and the 4-page Seller Property Questionnaire (SPQ).
Risk & Responsibility
It is important for every buyer to understand that they take on both risk and responsibility when purchasing property. Generally there are no guarantees in property sales, which is why it is standard practice for buyers to conduct thorough property inspections with the help of certified home inspectors, termite inspectors, and sometimes more (i.e., roof inspectors). Yelp.com is a good source for finding inspectors. Inspection reports become an official part of the disclosures made by the parties in order to finalize the purchase/sale.
With that said, sellers must remember that they have an affirmative duty to disclose certain material facts about the property condition within the seller’s knowledge, such as any hidden dangers of which the seller has been made aware (i.e., cracks in the property foundation, mold in the attic, a leaky dishwasher, a drug dealing neighbor, a potential dispute about the fence line). A seller who has information about such a problem (either through personal discovery, the disclosure of a previous owner, or by the report of a professional) must disclose the material facts. Making disclosure of information learned from a property inspection is as simple as providing the buyer a copy of the inspector’s report.
A seller who is unaware of an issue or problem has no duty to disclose the problem. The exception to this rule is that the seller will still be held to a ‘reasonable person’ standard; so if a reasonable person in the seller’s circumstances would have been aware of the issue (i.e., faulty wiring causes the lights to flicker on and off every 45-minutes or so), then a seller who lived in the house for even one week would have a difficult time trying to claim they did not know about the problem.
If the seller fails to disclose a problem, the buyer has many legal remedies. This area of the law is called ‘real estate nondisclosure litigation’.
Every Property in California is sold “as is” unless the parties specify otherwise in the contract itself. Therefore, if the parties want the Seller to make any changes or repairs to the Property before the sale closes, then they will need to specify exactly what should be done in the contract (either in the original contract or by addendum). There are only a handful of minor exceptions to this rule, such as the Seller’s obligation to strap the water heater, and the Seller’s obligation to provide carbon monoxide detectors.
Key point: Just because the sale is “as is”, this does not trump the law that requires a seller to disclose material facts about the property condition and history. In other words, sellers must always disclose material facts about the property, even when the sale is as-is.
For more information on disclosures, here is my post California Home Sale – Required & Standard Disclosures.
Greg Glaser, Attorney at Law
San Francisco Bay Area – Northern California
(925) 642-6651 — [email protected]
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