December 17th, 2018 at 2:31 pm
Effective January 1, 2019, the Transfer Disclosure Statement (TDS) law will be revised as follows:
- Buyer’s 5-Day Right to Cancel Upon Email Delivery: The TDS law will been expanded to address the timeframe for a buyer to cancel upon receipt of a TDS or an amended TDS by email. Under preexisting law, a buyer entitled to receive a TDS has the right to cancel the purchase agreement if the seller provides the TDS or an amended TDS after the buyer signs the offer to purchase. The timeframe for the buyer’s right to cancel is 3 days after delivery of the TDS in person, or 5 days if delivered by mail. The TDS law, however, did not previously address the timeframe for delivery by email, even though most buyers receive disclosures electronically. Now starting on January 1, 2019, a buyer shall specifically have 5 days to cancel after delivery of the TDS by email if the parties have agreed to conduct the transaction by electronic means. Paragraph 10A(7) of C.A.R.’s Residential Purchase Agreement (RPA) has been revised to reflect this change in the law. Paragraphs 28 and 30 of the RPA already set forth the parties’ agreement to conduct the transaction by electronic means.
- Attempt by Buyer’s Agent to Delay Delivery Will Be Ineffective: The new law also provides that the timeframe for the buyer’s right to cancel begins upon completion and delivery of the seller’s section of the TDS (Sections I and II), along with the listing agent’s section of the TDS (Section III). As background, apparently when certain buyers had no contingencies or they had removed all their contingencies, their own agents would attempt to preserve the buyer’s right to cancel by intentionally refraining from completing their own agent’s section of the TDS (Section IV), and delaying the delivery of the completed TDS to the buyer. The law has now specifically prohibited a buyer’s agent from trying to delay the delivery of the TDS in that manner. Paragraph 10A(2) of the RPA also prohibits such maneuvering.
- TDS Likely to Be Required for Most Trusts: As mentioned in last week’s Legal Tip, many trusts will no longer be exempt from the TDS, SPQ, and other disclosure requirements (see the C.A.R. Trust Advisory for the full list of disclosure requirements). Under preexisting law, a trust is generally exempt from the TDS and other disclosure requirements, unless the trustee is a natural person who is the “sole” trustee of a revocable trust, and has personally owned or occupied the property within the preceding year. Given that many trusts have co-trustees (e.g. spouses), rather than sole trustees, trusts have often been TDS exempt. Yet, it does not make much sense to require a sole trustee to do a TDS, but not if there is more than one trustee. Hence, effective January 1, 2019, the word “sole” has been removed from the law, and a trustee will be required to complete the TDS, SPQ, and other disclosures as long as he or she: (1) is a natural person; (2) is a trustee of a revocable trust; and (3) has personally owned or occupied the property within the preceding year.
Source: The full text of the above changes as well as other changes to the TDS law are set forth in Sections 7 to 13 of Assembly Bill 1289.
Copyright© 2018 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of December 17, 2018. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals.
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