Back to Basics: Seller’s Disclosure

The topic of seller’s disclosure generates multiple questions to the PAR Legal Hotline each week, and it is our third most popular topic overall. As a reminder, the Real Estate Seller Disclosure Law (with some exceptions) applies to a transfer of any interest in real estate that contains between one and four residential dwelling units. There are some exceptions to the requirement, which are listed on the first page of the Seller’s Property Disclosure Statement (Form SPD). But even with those exceptions stated clearly in the law and listed right there on the front of the form, there are some “creative” individuals who try to make up their own exceptions. Let’s go over some of the most asked “what-ifs” and possible answers.  

What if I’m selling a commercial property? 

A disclosure form may still be required, depending on the nature of the property. The requirement to disclose isn’t based on how the property is zoned or which agreement of sale you use. If the property in question contains between one and four residential dwelling units, then a disclosure form should be completed by the seller. For example, a mixed-use building with retail space on the ground floor and three apartments above sold with a commercial agreement of sale would require a disclosure form because there are three residential dwelling units. However, a six-unit multifamily apartment building would not require the seller to complete a disclosure form because there are more than four units. 

What if my seller is selling the property as-is? 

All property is sold as-is unless the parties agree otherwise, so this is not an exception to the seller’s duty to disclose material defects. As a bonus, this may also be a problem for the listing agent, who has their own duty to advise the seller of the disclosure requirement. 

What if the seller never lived in the property, or this is an investment property? 

These are also not exceptions. Even if the seller never lived there or had tenants in the property, they likely know more than they think about the condition of the property. A tenant may have made service requests. The investor should have received their own disclosure statement from the seller they purchased from. This knowledge should be passed along to the next buyer. 

What if the seller has a power of attorney helping them? 

This is not an exception to disclosure requirements. Having a POA does not relieve the seller of their obligation to make appropriate disclosures and the POA, as a fiduciary for the seller, should be doing their best to not subject the seller to liability for lack of disclosure. If the seller is able to assist the POA in answering questions, then they should do so; if the seller is unable to help, then the POA should provide as much information as they can. Either way, if the disclosures seem like they might be problematic (either because the information from the principal may be unreliable, or because the knowledge of the POA is incomplete), it could be helpful to provide some additional explanation of the situation to potential buyers. A power of attorney is not the same as an estate. Speaking of estates… 

What if the owner died and there is an estate? 

Start by asking your seller to clarify where they are in the estate process. If the property is being sold by the estate to distribute proceeds to the beneficiaries, then a seller disclosure exclusion applies. But this exemption does not carry over to the beneficiaries of the estate; once they have inherited the property and taken title from the estate, they will be required to make disclosures just like any other seller. 

What if the property is a manufactured home? 

A manufactured home is still a dwelling unit, even if it is not permanently attached to real property. A dwelling unit is generally defined in residential codes as a separate unit that provides independent living facilities for one person or household. If the manufactured home was intended to be used as, and is used as, a dwelling unit, then the seller should be making applicable disclosures. 

What if … anything else? 

Well … is it on the list or not? If a seller or listing broker can point to one of the listed exclusions and show they’re covered, then great. If “someone told them” about an alleged exclusion that’s not on the list, then no.