(this article was written by Evy L. Eschbacher, the newest attorney at the Brewer Offord & Pedersen LLP)
Selling a home can be on of the biggest steps in anyone’s life. Whether it involves letting go of old memories, bringing in a source of income, or expanding one’s family, it requires many thoughts and considerations. Hence the reason many sellers look to the advice and guidance of real estate brokers and attorneys in completing the required transaction forms needed for listing the property and sale.
To avoid liability for fraud, deceit, or misrepresentation, disclosures of all known material facts are required to be made by both, sellers and their agent, under federal and state law, as well as common law. Facts are generally considered material when such disclosures would affect the value and desirability of the property, or a buyer’s offer/decision to purchase the property. These often include disputes with neighbors, high-crime areas, the market value of the property, or even the amount of bedrooms in the home[1].
Below are some situations that a seller should disclose, but are not readily apparent as being relevant and material to buyers:
Living in a Haunted House
California law does not specifically require disclosures of paranormal activity that one may believe to have experienced in their home. However, if death is a result of such activity, there may be a disclosure requirement. In any event, if you have a belief that the home you are selling is haunted, you should likely take the necessary steps to ensure that you disclose such information to prospective buyer(s). Arguably, if a buyer were to discover such activity, they may be allowed to back out of the deal due to the non-disclosure of such ‘material’ fact.
Death (Prior to 3 years)
If a person has died in the home you are selling, you may worry that such a disclosure of information will taint the sale. However, Civil Code section 1710.2 provides some protections to sellers on this matter. Neither a seller nor real estate agent is required to voluntarily disclose a death, or the manner of death in the event that a person has died in the home more than three years prior to a transferee’s offer to purchase, lease, or rent the property. However, if the home was the scene of a violent or widely publicized murder, or if the buyer inquires as to whether any deaths have occurred on the property, you must disclose any such death and/or manner of death, even if it occurred more than three years ago.
Prior Occupant with HIV/AIDS
A seller is not required to voluntarily disclose that a prior occupant of the property was living with Human Immunodeficiency Virus (HIV), or died from Acquired Immune Deficiency Syndrome (AIDS)-related complications while living on the property which is being sold[2]. Individuals diagnosed with HIV or AIDS fall into a protected class under Federal law[3]. Therefore, if a buyer specifically asks an agent or seller whether a person had or died from HIV or AIDS-related complications while living in the home, they should answer that any such disclosure of that information could be a violation of the federal fair housing laws. Accordingly, if such information appears to be relevant and material to the buyer, the seller and/or agent should further advise the buyer to pursue such investigation as to the manner of death on their own.
Natural Hazards Disclosure Statement
The Natural Hazards Disclosure Act requires sellers and their agents to disclose whether the property being sold lies within one or more of the state or local-mapped hazard areas. These areas include: (1) special flood hazard area; (2) area of potential flooding shown on a dam failure inundation map; (3) a very high fire hazard severity zone; (4) a wildlife area that may contain substantial forest fire risks and hazards; (5) an earthquake fault zone; and (6) a seismic hazard zone. The law requires this information to be provided by a seller to a potential buyer with the use of a one-page form known as the Natural Hazards Disclosure Statement (NHDS) form. In rare cases, a seller is not required to provide a prospective buyer with a NHDS. For example, these cases include transfers involving probate, transfers pursuant to a writ of execution, transfers between co-owners, and any bankruptcy or foreclosure sales[4]. Even in such event that the NHDS is not required, a disclosure as to whether the property is in a hazard zone may still be necessary. Therefore, it is always best to use the standard NHDS form and disclose whether the property is within a natural hazard zone to make sure you are in compliance with all state regulations.
Selling a Home in Foreclosure
California law recognizes that a seller of a home in foreclosure may rarely see the property; as such it provides that the property is sold “AS IS.” This means that the seller will not be required to provide the common requisite disclosures as provided by Civil Code section 1102. However, “AS IS” does not mean sellers do not have to duty to disclose, nor does it give a seller or their agent a pass to be dishonest or conceal material facts. Thus, the laws provide that a seller must still disclose any known material facts to a potential buyer and the listing must state whether the seller is in possession of a disclosure statement.
Disclose, Disclose, Disclose
If any of the above-mentioned conditions have occurred in your home, and the potential purchaser does not have knowledge of such, and cannot reasonably discover such information, you must err on the side of disclosure to avoid any potential liability. The agreed-upon purchase price of your home may be adversely affected by the disclosure of some of these issues, but you may take a bigger hit in legal fees should you fail to disclose. Therefore, it is better if sellers and their agents provide all prospective buyers with detailed and thorough disclosures of all known facts concerning the property. And if you are ever unsure, always disclose, disclose, disclose.
[1] Cal. Civ. Code §§ 1102-1102.15; Cal. Civ. Code §§ 2079-2079.11; Calemine v. Samuelson (2009) 171 Cal.App.4th 153, 161. If you have decided to sell your California home, there is a helpful, but not exhaustive, Summary Disclosure Chart published by the California Association of Realtors to assist sellers in knowing what some required statutory disclosures are.
[2] Cal. Civ. Code § 1710.2.
[3] Rehabilitation Act of 1973 § 504; Americans with Disabilities Act of 1990.
[4] Civ. Code § 1103.1(a) (this list of exemptions is not exhaustive as the Code provides for many more).
