DISCLOSURES, SINCE 1984

The two most important statutory disclosures are the Transfer Disclosure Statement, dealing with the specific property, and the Natural Hazard Disclosure Statement, dealing with the natural hazards associated with the neighborhood in which the property is located.


TRANSFER DISCLOSURE STATEMENT

Easton v Strassburger, 152 Cal.App.3d 90 (1984), is a decision of the California Court of Appeals, not the California Supreme Court. However, it has been adopted by the legislature and the industry for the proposition that licensees must disclose not only material defects known to the broker but unknown to and unobservable by the buyer, but also material defects of which the broker should have been aware.

The California legislature effectively adopted the Easton decision by enacting Civil Code Section 1102, et seq., effective January 1, 1987, mandating a seller disclosure form in a specific format. The form itself is set forth at Section 1102.6.

The most important question on the form is: "Are you (seller) aware of any significant defects/malfunctions in any of the following: ....." I find that sellers often fail to respond, yes or no, or respond no. I take this to mean that the seller is not aware of such defects/malfunctions; but that such defects/malfunctions may exist. So never substitute sellers' responses for your own due diligence.

In like manner the Legislature codified the Easton duty of care as to real estate licensees by enacting the "Duty to Prospective Purchaser of Residential Property" Act - Civil Code Section 2079, et seq., also effective January 1, 1987. Section 2079(a) provides:

"It is the duty of a real estate broker or salesperson ..... to a prospective purchaser of residential real property comprising one to four dwelling units ..... to conduct a reasonably competent and diligent visual inspection of the property offered for sale and to disclose to that prospective purchaser all facts materially affecting the value or desirability of the property that such an investigation would reveal, if that broker has a written contract with the seller to find or obtain a buyer or is a broker who acts in cooperation with that broker to find and obtain a buyer."

Throughout the Bay Area is has become customary for sellers to prepare a supplementary Transfer Disclosure Statement on forms provided by the local Association. This trend to disclose, disclose, disclose is for the benefit of all parties.


NATURAL HAZARD DISCLOSURE STATEMENT

Effective June 1, 1998, California Civil Code 1103.2 provides that sellers and sellers' licensees provide buyers in specified transactions with a disclosure entitled the Natural Hazard Disclosure [NHD] Statement, indicating whether the residential property is located in one or more of six so-called NATURAL HAZARD ZONES:

1) A flood hazard zone as designated by the Federal Emergency Management Agency [FEMA]
- disclosure by seller's licensee, or by seller without a licensee;

2) An area of potential flooding after a dam failure (also known as an "inundation area")
- disclosure by seller's licensee, or by seller without a licensee;

3) A very high fire hazard severity zone
- disclosure by seller;

4) A wildland fire area (also known as "state fire responsibility area or SRA)
- disclosure by seller;

5) An earthquake fault zone
- disclosure by seller's licensee, or by seller without a licensee;

6) A seismic hazard zone
- disclosure by seller's licensee, or by seller without a licensee.

No disclosure is required if the property is not located in any of these six zones. But that's the challenge. It is risky for the seller or seller's licensee to assume that the form is not necessary. And, it is just as risky for the buyer to rely on such an assumption.

Civil Code Section 1102.4 provides that neither the seller nor either licensee shall be liable for any error, inaccuracy or omission of any information delivered to the buyer if the error, inaccuracy or omission was not within their personal knowledge, and if the information was provided by public agencies or "prepared" by third party experts acting within the scope of their license or expertise.

So prudence dictates that the buyer contractually require the seller to provide a NHD Statement, "prepared" by a registered geologist or other expert acting within the scope of his/her license or expertise - at least as to items 5 and 6 of the Disclosure, the geologic items, which I consider the most important for my clients in San Francisco and Marin. So I look for his/her seal on the report. Note, Section 1102.4 does NOT require a seal. But if there is no seal, how would we know if the report or opinion was "prepared" by a registered geologist. Maybe yes, maybe no.


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