Do I Really Need to Disclose That?

One of the hot topics on the legal hotline continues to be the Seller’s Property Disclosure Statement (Form SPD), and two specific questions have been coming up recently.

The first is, “Does the seller need to fill out the Seller’s Property Disclosure Statement if…?”

Well, as is the favorite answer of all attorneys is, it depends.

The Real Estate Seller Disclosure Law carves out 10 different exceptions, and all 10 are listed on the first page of the form. Apply the facts of this particular transaction to the listed exceptions to see if any of them give a legal reason not to complete the form. If the facts don’t fit, then a form is required.

The most common version of this question is the seller who says, “But I never lived in the property.” That’s not one of the listed exceptions, so that seller still needs to fill out a form. If the seller has slim actual knowledge about the property condition because he or she hasn’t lived there, it may be in the seller’s best interest to explain why the form may be less complete than usual, but the questions still need to be answered as completely as possible, which may include reviewing things like maintenance or repair records for the property.

This leads to a second common question, which is “Does a seller need to disclose an issue if it has been fixed?”

Typically, if a material defect was fixed during the current ownership of the home, it is best to disclose the issue with the explanation of the fix. This protects the seller by giving all knowledge to the buyer, just in case the issue was to reemerge after settlement.

Certain paragraphs of the SPD expressly require disclosing prior issues and any remediation efforts. For example, the section on basements and crawl spaces asks, “Do you know of any repairs or other attempts to control any water or dampness problem in the basement or crawl space?” (section 5(B)(2)), and then asks the seller to disclose “the location and extent of any problem(s) and any repair or remediation efforts” for any items identified in the section. Section 7309 of the law states that sellers may rely on reports from experts such as home inspectors or contractors (so long as the seller isn’t aware that the information is incorrect), so sellers may want to consider providing contractor reports rather than trying to summarize the repairs themselves.

When considering any of the above, remember that more disclosure is usually better than less disclosure, and that disclosing items during a transaction is likely to be less risky (and far less expensive) than explaining the lack of disclosure in a deposition after the transaction.