BACKGROUND:
Caveat emptor, “let the buyer beware,” was the legal doctrine that
applied in real property transactions in the early 1900s. Under this
theory, the seller was not obligated to reveal all that he or she knew
about a property, but rather the buyer was under a duty to inquire and
investigate. That legal doctrine has been eroded by case law in most
jurisdictions. Today, sellers are obligated to disclose existing defects
relating to the value or desirability of a property.
Since a home is the largest single investment that most people make
in a lifetime, it is important that all relevant information regarding
its condition be provided to prospective purchasers. The seller, who is
frequently also the occupant, is in a superior position to the real
estate agent to provide information relating to the condition of the
property.
Disclosure forms are used to convey information of which the seller
is aware to prospective purchasers regarding the property. By doing so,
there should be no surprises to the buyer after the closing. The purpose
of disclosure is to inform prospective purchasers of the condition of
the property. Effective use of these forms results in individuals who
are more knowledgeable about relevant items in a real estate
transaction. (Background information provided by the NATIONAL
ASSOCIATION OF REALTORS®.)
KEY POINTS OF THE LAW:
The Real Estate Seller Disclosure Law applies to all residential real
estate transfer except in: (1) transfers from a fiduciary in the course
of the administration of a decedent’s estate, guardianship,
conservatorship or trust; and (2) transfers of new residential
construction that has not been previously occupied.
The Real Estate Seller Disclosure Law applies to the transfer of
interest in real estate of one to four residential dwelling units,
whether by sale, exchange, installment sales contract, lease with an
option to purchase, grant, or transfer of interest of unit in a
residential condominium cooperative. Sellers who intend to transfer any
interest in real property will complete all applicable items in a
property disclosure statement and deliver to the buyer a signed and
dated copy prior to the signing of a written agreement by the seller and
prospective buyer that would, subject to the satisfaction of any
negotiated contingencies, require the prospective buyer to accept a
transfer of the property.
A seller must disclose to a buyer all known material defects that are
not readily observable. The disclosure statement is designed to assist
the seller in complying with the disclosure requirements and to assist
the buyer in evaluating the property being considered. The statement
discloses the seller’s knowledge of the condition of the property as of
the date signed by the seller and is not a substitute for any
inspections or warranties that the buyer may wish to obtain. The
statement is not a warranty of any kind by the seller or a warranty or
representation by any listing real estate broker, any selling real
estate broker or their agents. The buyer is encouraged to address
concerns about the conditions of the property that may not be included
in the statement. This statement does not relieve the seller of the
obligation to disclose a material defect that may not be addressed on
the form.
The seller’s delivery of the property disclosure statement to the
buyer would be by personal delivery; first class mail; certified mail,
return receipt requested; or facsimile transmission to the buyer or the
buyer’s agent. The seller is not obligated to make any specific
investigation or inquiry in an effort to complete the disclosure
statement.
A seller would not be liable for any error, inaccuracy or omission of
any information delivered pursuant to the law if: (1) the seller had no
knowledge of the error, inaccuracy or omission; (2) the error,
inaccuracy or omission was based on a reasonable belief that a material
defect or other matter not disclosed had been corrected; or (3) the
error, inaccuracy or omission was based on information provided by a
public agency, home inspector, contractor, or person registered or
licensed under section 7503(a) about matters within the scope of the
agency’s jurisdiction or such other person’s occupation and the seller
had no knowledge of the error, inaccuracy or omission.
Any agent of a seller or a buyer would not be liable for any
violation of this law unless the agent had actual knowledge of a
material defect that was not disclosed to the buyer or of a
misrepresentation relating to a material defect. According to the law,
an “agent” is any broker, associate broker or salesperson as defined in
the “Real Estate Licensing and Registration Act.”
Also included is a provision that stipulates municipal or local
authorities may not mandate particular disclosures to the buyer in
connection with a residential real estate transfer or provisions on any
particular subject included in an agreement of transfer, with the
following exception: Ordinances or regulations adopted by municipal or
local authorities prior to the effective date of this law. Such
ordinances or regulations shall continue in full force and effect, but
may not be amended to impose new or expanded requirements, increase the
scope of any provision included in an agreement of transfer or impose
new requirements on any agent, buyer or seller involved in a residential
real estate transfer.
