Multiple Choice Question: Under what circumstance is a seller legally obligated to provide a buyer with property-related reports that are in the seller’s possession? Pick the best answer:

A. In every circumstance.
B. When the seller falls under the Transfer Disclosure Statement (TDS) requirement for one-to-four residential units.
C. In most circumstances.
D. When the report is less than 4 years old. 

Answer: Answer A is not the best answer, technically speaking. The law requires a seller of any type of property to disclose any known material facts affecting the property that are not known to, or within the diligent attention of, the buyer. Although reports usually contain such material facts, it is at least theoretically possible that a particular report does not, in which case, the seller would not be legally obligated to provide that report to the buyer. It would, however, be foolhardy for a seller or listing agent to take on the responsibility and liability of reviewing every report to determine whether it contains such material facts. We would prefer sidestepping that determination altogether by simply giving the buyer all reports in the seller’s possession.

Answer B is generally a true statement, but it’s not the best answer. Aside from the legal standard discussed above, sellers that fall under the TDS requirement have a contractual obligation to provide their buyer with a Seller Property Questionnaire (SPQ) under paragraph 11A(3) of C.A.R.’s Residential Purchase Agreement (RPA). In paragraph 5 of the SPQ, a seller must disclose whether the seller has any reports. If the answer is “yes,” the SPQ requires the seller to provide the buyer with any such documents in the seller’s possession.

However, Answer B is not the best answer because even sellers who do not fall under the TDS requirement should generally provide their buyers with such reports. Hence, Answer C is the best answer.

As for TDS-exempt sellers of one-to-four residential units, they have a contractual obligation to provide their buyer with an Exempt Seller Disclosure (ESD) as according to paragraph 11A(3) of the RPA. Under paragraph 3K of the ESD, the seller must disclose any known material facts or material documents in the seller’s possession. Unlike the SPQ, the ESD does not specifically require the seller to provide the buyer with such documents. But it would be a very bad idea for a seller to answer “yes, I have such documents,” but not actually provide the buyer with such documents.

As for sellers of properties that are not one-to-four residential units, they may also be legally and/or contractually obligated to provide their buyers with reports in their possession. From a contractual standpoint, these sellers may enter into a C.A.R. Residential Income Purchase Agreement (including 5+ residential-unit properties), Commercial Property Purchase Agreement, or Vacant Land Purchase Agreement. Those agreements require the seller to complete a Commercial Seller Property Questionnaire (CSPQ) or Seller Vacant Land Questionnaire (VLQ). Similar to the SPQ, both the CSPQ and VLQ require the seller to provide the buyer with any reports in the seller’s possession.

Answer D is wrong. Old reports are not specifically excluded from either the disclosure laws or the contractual requirements in the C.A.R. forms.

-Thank you to Hazel Perera (Pasadena Office) for suggesting this week’s legal tip.

Copyright© 2024 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 February 19, 2024. 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. Written by Stella Ling, Esq.