Wednesday, 26 July 2017

Housing Counsel: New Seller Disclosure Requirements

Written by Posted On Monday, 03 October 2005 00:00

Seller disclosure has become an important element in any residential real estate transaction. Maryland and the District of Columbia have recently revised the legal requirements when property is sold, and buyers, sellers and real estate brokers and agents must immediately become familiar with the new procedures and the new forms.

Maryland

For many years, sellers of single family residential property could either fully disclose known conditions and defects in their house, or they could opt to disclaim disclosure. In other words, sellers could advise their prospective buyers, in writing, that the "owner of the real property ... makes no representations or warranties as to the condition of the real property ... and the purchaser will be receiving the property 'as is,' with all defects which may exist."

The Maryland Legislature has changed the law. Effective Saturday, October 1, 2005, even if a seller decides to disclaim disclosure, any latent defects of which the seller has actual knowledge must nevertheless be disclosed.

A "latent defect" is defined as a material defect in real property or an improvement to real property that: "(1) a purchaser would not reasonably be expected to ascertain or observe by a careful visual inspection of the real property, and (2) would pose a direct threat to the health or safety of ... the purchaser or ... an occupant of the real property, including a tenant or invitee of the purchaser."

Real estate contracts must include a "conspicuous notice advising the purchaser of his rights to receive the disclosure/disclaimer statement."

The Maryland Real Estate Commission has promulgated the new form, which is available at its website .

The October 1st date is critical. Thus, for example, if a seller signs a sales contract on September 20, but did not provide the disclosure/disclaimer form to the purchaser by September 30, the seller must use the new form. On the other hand, if the purchaser has already been given the old form, the law does not appear to require that a revised form be furnished to the buyer. However, cautious sellers would be well advised to comply with the new law and provide the new form just to be on the safe side.

It is to be pointed out, however, that if there is a real estate broker or agent involved in the transaction, and if he has personal knowledge of any latent defects, he is legally obligated to disclose those defects to the potential purchaser, regardless of whether the seller discloses or disclaims.

There are several exemptions to this disclosure requirement. For example, sellers of new homes that have never been occupied -- or for which a certificate of occupancy has been issued within one year before a sales contract is entered into -- are not required to provide any disclosures.

Additionally, if a fiduciary involved in the administration of a decedent's estate, guardianship, conservatorship or trust conveys property, no disclosures are required.

District of Columbia

The law in the District also requires most sellers to disclose a number of issues relating to the property that is being sold. Unlike Maryland, however, District property owners do not have the option to disclaim disclosure.

Recently, the District's Board of Real Estate issued a temporary update to the required Seller's Disclosure form. Three new questions dealing with historic districts have been added.

Sellers must now also disclose:

  1. if the property is a DC landmark or located within a historic district;

  2. whether the property has been cited for a violation during the period that the seller owned the property;

  3. whether the property is subject to a conservation easement.

According to the Board of Real Estate, the old form is now obsolete and the new form must be used, effective immediately. However, this columnist was unable to locate the revised form on the District's website.

There are a number of exemptions to the disclosure requirement.

  • court ordered transfers of property;

  • transfers made by a non-occupant fiduciary administering a decedent's estate, guardianship, conservatorship or trust. Please note the distinction between the District and Maryland. In the District, if the fiduciary is living in the property at the time a sales contract is entered into, disclosures must be provided to a buyer.

  • transfers between spouses under a divorce decree or a property settlement agreement incidental to a judgment.

Seller disclosure has become an important part of any real estate transaction. There is a growing body of law throughout the country relating to these disclosure requirements.

Sellers should not be afraid to disclose known problems in their house. It is better to disclose now, than be hit with a lawsuit by the buyer after he discovers not only that there are defects in the property, but that the seller knew -- or even should have known -- of before the property was transferred.

In my opinion, disclosure solves most -- if not all -- consumer related problems. You can never go wrong in telling the truth about your house.

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Benny L. Kass

Author of the weekly Housing Counsel column with The Washington Post for nearly 30 years, Benny Kass is the senior partner with the Washington, DC law firm of Kass, Mitek & Kass, PLLC and a specialist in such real estate legal areas as commercial and residential financing, closings, foreclosures and workouts.

Mr. Kass is a Charter Member of the College of Community Association Attorneys, and has written extensively about community association issues. In addition, he is a life member of the National Conference of Commissioners on Uniform State Laws. In this capacity, he has been involved in the development of almost all of the Commission’s real estate laws, including the Uniform Common Interest Ownership Act which has been adopted in many states.

www.kmklawyers.com
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