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Letters of Introduction

Letters of Introduction

Transaction Management

Overwhelming. That may be the best word to describe the process of providing disclosures when selling real estate. Disclosure laws come from all directions, be it federal, state, or local law. To make matters worse, each disclosure law has its own set of complexities, including what is required, when it's required, and who must comply. To top it off, the world of disclosures is ever-changing with new laws introduced every year and existing laws often modified.

Given the complexities of providing disclosures, it's no wonder that getting professional assistance for this daunting task is a major reason for sellers and buyers to seek out the services of real estate agents. Often as the agent, it's not enough to know what's required. You need to know the practical implications and how to properly address the many questions your own clients pose to you about disclosures.

This guide aims to help WRG agents cut through the confusion on these disclosure laws. It explains the disclosure requirements by delving a little deeper into who, what, when, and why. It also provides many Practice Pointers so you'll know how to do what you'll need to do. Although this guide covers most common disclosure requirements under California and federal law, it does not cover all disclosures required by law or practice.

The California Association of Realtors® (C.A.R.), is one of the largest state trade organizations in the United States. C.A.R. provides many legal services to its members to assist in the performance of real estate services. Two of the most popular publications that can help clarify disclosure requirements are the Summary Disclosure Chart for Realtors and the New Home Disclosure Chart for Realtors

These are helpful charts summarizing the disclosure laws for you to refer to in your day-to-day practice. They can be used for your own reference, or you might like to share them with your clients. Also, you may view the NAR Property Disclosures - What you Need to Know for a quick reference.

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Transfer Disclosure Statement

Overview . It's the granddaddy of them all. To ensure a meaningful disclosure of the condition of residential properties when transferred, the California legislature created the Real Estate Transfer Disclosure Statement (TDS). This three-page form addresses many aspects of a property that may be of interest or concern to a prospective buyer. Sellers of most residential properties of one-to-four units in California must complete and deliver the TDS to their buyers.

The TDS contains two main sections. The first one is the seller's section. It is essentially a questionnaire of what the seller knows about the property, including its amenities (e.g., dishwasher, air conditioning, automatic garage door openers), any significant defects (e.g., roof, foundation, electrical system), and other items of interest or concern (e.g., permits, neighborhood nuisances, CC&Rs).

The second part is the agent's section. It provides space for both the listing agent and the buyer's agent to write down the results of their visual inspection of the property. By law, real estate agents of residential properties consisting of one-to-four units must conduct a reasonably competent and diligent visual inspection of the property, and disclose all facts materially affecting the value or desirability of the property that an investigation would reveal (Cal. Civ. Code section 2079). The only exception is subdivision sales that fall under the public report requirement or one of its exemptions, unless the property has been previously occupied (Cal. Civ. Code section 2079.6).

PRACTICE POINTER. C.A.R. publishes two TDS forms: the Real Estate Transfer Disclosure Statement (Form TDS) for real property, and the Manufactured Home and Mobile home: Transfer Disclosure Statement (Form MHTDS). These and other standard forms for your real estate practice are available at C.A.R. or your local Board/Association. Be sure to familiarize yourself with the forms you use before you present them to your clients for review or completion, so you won't be caught off-guard if your client asks you a question about what they're signing.

Applicability. The TDS is required for the transfer of most residential properties of one-to-four units. More specifically, with certain exceptions listed below, the law requires delivery of the TDS in the following transactions:

EXCEPTIONS : The following transactions are exempt from the TDS requirement:

PRACTICE POINTER. The rule for trusts is rather convoluted. Generally speaking, if the seller is a trust, the TDS is not required. However, if the individual selling the property on behalf of the trust (i.e., the trustee) has personally owned or occupied the property within the last year, the TDS is probably required.

PRACTICE POINTER. Agents beware! Even if a transaction is exempt from the TDS requirement, it is generally not exempt from the real estate agent's duty to visually inspect residential properties of one-to-four units. In this situation, you may use C.A.R.'s Agent's Inspection Disclosure (Form AID) to show that you have conducted a visual inspection of the property, and to write down the results of that inspection.

The Seller’s Duties. A seller subject to the TDS law must complete the TDS in good faith and deliver it to the buyer. Sellers should complete the TDS using the knowledge they have personally gained from their own experience. Thus, agents should not complete the Seller's section of the TDS.

For sales transactions, the TDS must be delivered to the buyer as soon as is practical. For transfers by installment land sale contracts, lease with option to purchase, and ground lease coupled with improvements, the TDS must be delivered as soon as practicable before entering into a contract.

Sellers should not attempt to waive the TDS requirement by characterizing a transaction as an "as is" sale. Any waiver of the TDS requirement is void as against public policy and unenforceable.

Duties of the Buyer’s Agent. A buyer's agent must generally deliver the TDS to the buyer. In the event a buyer's agent cannot get the TDS from the seller or listing agent, the buyer's agent must advise the buyer in writing of the buyer's right to the TDS.

The Buyer’s Rights. If the TDS (or any amendment) is delivered to the buyer after the execution of the buyer's offer to purchase, the buyer has three days after delivery in person (or five days after delivery by mail) to terminate the offer by notifying the seller or the seller's agent in writing. The buyer, however, has no right to rescind if the seller delivers the TDS before the buyer writes an offer.

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Natural Hazard Zones

Overview. California may be one of the most desirable places on earth to live but, like other places, its residents bear their share of risks, such as fires, floods and earthquakes. Recognizing this, the California legislature has enacted extensive laws over the years aimed at identifying geographical zones susceptible to natural hazards, and requiring sellers and real estate agents to disclose zone-related information to buyers.

In 1997, the California legislature enacted the Natural Hazards Disclosure Law to comprehensively restructure disclosure laws pertaining to natural hazards. This law expanded the disclosure requirements somewhat, but it also attempted to unify and simplify them. This law also introduced the Natural Hazard Disclosure Statement, a single-page form for disclosing natural hazard zones.

What Are These Hazard Zones? The law regulates the disclosure of six specific natural hazard zones: two flood zones, two fire zones, and two earthquake zones. Here's a brief summary:

Applicability. Disclosure of natural hazard zones must be made for all sales of real property, and resales of personal property mobile homes and manufactured homes. Aren't some transactions exempt? The answer is no. One of the most common misunderstandings in providing disclosures is that certain sellers are exempt from the natural hazard disclosure laws. In fact, there are no exemptions from the duty to disclose natural hazard zones. For example, even if a transaction is a probate sale or a lender's REO sale, it is not exempt from natural hazard zone disclosures. In addition, although many other disclosure rules apply only to the sale of residential properties of one-to-four units, the duty to disclose natural hazards also applies to the sale of apartment buildings, commercial buildings, industrial structures, and vacant land.

Getting the Information . You can get maps and parcel lists from a variety of sources, including in some cases, the responsible governmental agencies. In addition, many disclosure-reporting companies offer a variety of disclosure-related services to the real estate industry. These companies, such as Disclosure Source, Disclosure Save, and Property ID, can perform extensive searches to determine whether a particular property is located in the hazard zones, and will provide clients with comprehensive reports detailing their findings.

PRACTICE POINTER. Factors to consider when choosing a disclosure reporting company include the range of services provided, the turnaround time, and a company's qualifications, experience, reputation, and insurance coverage.

What Form Should Be Used? Now that we know what the disclosure duty is, we still need to know how to satisfy that duty. As stated above, the Natural Hazard Disclosure Law created a new disclosure document known as the Natural Hazard Disclosure (NHD) Statement. With certain exceptions discussed below, the NHD Statement must be used to disclose natural hazard zones for the following types of transactions:

Certain transactions are exempt from the NHD Statement requirement, such as probate sales, foreclosure sales, and trust sales. The NHD Statement is also not required when selling residential properties with five or more units, or non-residential properties.

For non-exempt properties, such as most residential properties with one-to-four units, the NHD Statement is mandatory. For exempt properties, disclosure that a property is located in a hazard zone is still mandatory, but the use of the NHD Statement is voluntary.

Using Disclosure Reporting Companies. The law does not specifically require anyone in particular to complete the NHD Statement. In practice, the NHD Statement is usually completed by the seller, the agent, or a third-party disclosure reporting company.

PRACTICE POINTER. A purchase agreement between a buyer and seller may require more than what the law requires. It is not uncommon for buyers to ask for expert reports as part of their purchase offer. For example, C.A.R.'s California Residential Purchase Agreement and Joint Escrow Instructions (Form RPA-CA) gives a buyer the option to request that the seller pay for a natural hazard zone disclosure report prepared by a certain disclosure reporting company. If the seller agrees, that seller becomes contractually obligated to provide an expert's report, even though it's not required by law .

Substituted Disclosure. If a seller uses a disclosure reporting company, the seller and seller's agent will not be held liable for any error or inaccuracy in the expert's report or opinion given to the buyer, as long as the seller or seller's agent has no personal knowledge of that error or inaccuracy.

Duties Of The Buyer's Agent. A buyer's agent is not obligated to disclose natural hazard zones. He or she need only deliver to the buyer the NHD Statement provided by the listing agent or seller.

The Buyer's Rights. Once a seller or agent provides the disclosures required by this law, the next logical question is, what can the buyer do with that information? In transactions which require an NHD Statement (i.e., most one-to-four unit residential sales), the buyer may have the right to rescind the purchase contract. For these transactions, if the NHD Statement or any required amendment is delivered after the execution of the buyer's offer to purchase, the buyer has three days after delivery in person, or five days after delivery by mail, to terminate his or her offer by delivering a written notice of termination to the seller or listing agent. For transactions that do not require the NHD Statement, we know the seller must still disclose hazard zones, but the buyer does not have an automatic rescission right.

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Mello-Roos Taxes and 1915 Bond Act Assessments

Overview. A Mello-Roos Community Facilities district is an entity formed by a local government, district, or agency to finance a public service or public facility, such as police protection, fire protection, schools, and libraries. A Mello-Roos district finances these projects by levying special taxes against the property owners within the area who benefit from these projects.

1915 Bond Act assessments are fixed lien assessments collected in installments to secure bonds issued under the Improvement Bond Act of 1915. This Improvement Bond Act was enacted in the year 1915 to allow local governments to issue bonds and collect assessments as a way of paying for the costs of constructing streets, public ways, and other work and improvements.

The law requires a seller of real property, under certain circumstances, to disclose to a prospective buyer that the property is located in a Mello-Roos district, or subject to a 1915 Bond Act assessment.

Applicability. With certain exceptions, this disclosure law applies if both of the following conditions are met:

Transfers exempt from this disclosure law are virtually identical to the exemptions from the TDS requirement discussed previously, such as, but not limited to, probate sales, foreclosure sales, REO sales, and trusts.

The Seller's Duties. The seller must make a good faith effort to obtain a notice of Mello-Roos special tax or notice of 1915 Bond Act assessment from each levying local agency.

These local governmental agencies must respond to the seller's request within five days, and may charge a reasonable fee for their services. Once the seller obtains a notice, he or she must provide it to the buyer as soon as is practical. The notice may be mailed to the buyer or delivered personally.

Disclosure under this law provides sellers with a protection from liability. Delivery of the Mello-Roos and 1915 Bond Act disclosure notices to the buyer shall be deemed to satisfy any responsibility the seller may have to inform the buyer about special taxes, assessment installments, or the existence of any levying district. No additional information is required.

Substituted Disclosures For 1915 Bond Act Assessments. Although notices of Mello-Roos taxes are usually readily available, many counties in California do not currently provide notices of 1915 Bond Act assessments.

In lieu of a 1915 Bond Act notice prepared by a governmental agency, the seller may provide the buyer with a disclosure notice obtained from a nongovernmental source, such as a disclosure reporting company if the notice conforms to certain statutory requirements as discussed below.

Disclosures From Non-Governmental Sources. Both Mello-Roos and 1915 Bond Act notices can be from non-governmental sources, such as disclosure reporting companies if they conform to certain statutory requirements. First, disclosure companies can change the statutory notice forms or consolidate information from two or more levying districts as long as the information is presented clearly and accurately. Secondly, disclosures prepared by non-governmental sources must contain the following information:

For Mello-Roos:

For 1915 Bond Act:

The Agent's Duties. The law provides that delivery of the disclosure notices to the buyer shall be deemed as satisfying any responsibility the seller and the agent may have, to inform the buyer about special taxes, assessment installments, or the existence of any levying district.

Failure To Comply. A seller who fails to comply with this disclosure law may be liable to the buyer for any damages suffered by the buyer. For subdivision sales, a subdivider who willfully violates the Mello-Roos disclosure rules may be held liable for actual damages, attorney's fees, and a fine up to $500.

The Buyer's Rights. Once the seller discloses Mello-Roos special taxes or 1915 Bond Act assessments to the buyer, what can the buyer do with that information? Because this disclosure law is part of the TDS law, the buyer has the same rescission rights as those under the TDS rules. If delivery occurs after the signing of an offer to purchase, the buyer has three days after personal delivery of the disclosure notices (or five days after delivery by mail) to terminate the purchase contract by delivering a written notice of that termination to the seller or listing agent.

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The Residential Environmental Hazards Booklet

Overview. Environmental hazards affecting our homes are a health concern. They are also rapidly becoming an equally important legal concern. California has addressed these issues by developing a booklet entitled Residential Environmental Hazards: A Guide for Homeowners, Buyers, Landlords and Tenants. This booklet provides homeowners and prospective buyers with information on environmental hazards that may affect a property. The environmental hazards covered by the booklet are asbestos, formaldehyde, hazardous waste, household hazardous waste, lead, mold, and radon. Also see the EPA booklet on Radon.

PRACTICE POINTER. C.A.R. publishes a three-part booklet which includes, as the first part, this environmental hazards booklet. The other two sections in this three-part booklet are Protect Your Family From Lead in Your Home and The Homeowner's Guide to Earthquake Safety, both discussed below.

The environmental hazards booklet is designed to be used when selling or renting real property.

The Seller's And Agent's Role. Although delivery of the environmental hazards booklet is purely voluntary, it is highly recommended. This booklet provides a valuable shield from liability. By law, delivery of the booklet will be deemed to be adequate to inform a buyer about the environmental hazards described in the booklet. No additional information is required. This protection applies to both sellers and their agents, either of whom can provide the booklet to the buyer.

PRACTICE POINTER. The seller or agent can get the buyer's acknowledgement of
receipt as proof that the booklet has been delivered.

Disclosure Of Actual Knowledge. It's understandable for a seller or agent to feel reluctant to flag environmental hazards issues for prospective buyers. However, it's best to disclose, because the failure to do so could result in dire legal consequences. Delivering the environmental hazards booklet does not satisfy a seller's or agent's duty to disclose any actual knowledge of environmental hazards affecting the property. When in doubt, it is better to err on the side of caution by disclosing what reasonably might be considered an environmental hazard.

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Lead-Based Paint Hazards

Overview. Lead poisoning is a very serious concern. In young children, it can cause irreversible health effects, including brain damage, mental retardation, convulsions, and even death. See the Protect Your Family From Lead in Your Home.

To protect families from exposure to lead, Congress passed the Residential Lead-Based Paint Hazard Reduction Act of 1992 (also known as Title X). This law directed HUD and the U.S. Environmental Protection Agency (EPA) to establish disclosure standards when selling and leasing homes built before 1978. Because these are federal rules, they are somewhat different from what you've encountered under California law. Let's take a closer look.

Applicability . In 1978 the government banned the use of lead paint in housing. HUD has also indicated that it does consider pre-1978 mobile homes to be covered by the law.

The disclosure law applies to both sales and leases (including month-to-month tenancies) of " target housing" which includes most residential properties built before 1978.

Lead disclosures are required for the sale of multifamily target housing, such as apartment buildings (even those with 5 units or more).

The following transactions and properties are exempt from the lead disclosure requirements:

The Seller's Duties. A seller has a lot of obligations under this law, but they are quite manageable in practice if grouped into four main tasks as follows:

1. Provide the buyer with an EPA-approved lead hazard information pamphlet.

PRACTICE POINTER. To satisfy this first requirement, you can use C.A.R.'s three-part booklet that includes, as the second part, the pamphlet entitled Protect Your Family From Lead in Your Home.

2. Provide the buyer with a 10-day opportunity to conduct an inspection or risk assessment for lead-based paint and lead-based paint hazards. The parties can mutually agree in writing to change the time frame for inspection, or to waive the inspection entirely, by indicating so in writing.

PRACTICE POINTER. C.A.R.'s California Residential Purchase Agreement and Joint Escrow Instructions (Form RPA-CA) complies with this second requirement by providing a 17-day opportunity for the buyer to inspect the property, but the parties can change the time frame if desired.

3. Fill out and sign a disclosure statement attached to the purchase contract,
which includes a standard Lead Warning Statement and other information.
The seller must deliver this disclosure statement to the buyer for signature,
and then retain a copy of the completed statement for at least 3 years.

PRACTICE POINTER. C.A.R.'s standard form Lead-Based Paint and Lead-Based Paint Hazards Disclosure, Acknowledgment and Addendum (Form FLD) may be used to satisfy this third requirement.

4. Disclose the presence of any known lead-based paint or lead-based paint
hazards in the property, and provide any available records or reports
(including common areas). The seller should also disclose any additional
information available, such as the basis for determining the presence of
lead-based paint or lead-based paint hazards, its location, and the condition of the painted surfaces.

PRACTICE POINTER. To satisfy this fourth requirement, sellers may use C.A.R.'s standard form Real Estate Transfer Disclosure Statement (Form TDS) and attach any available records or reports. The first question in Section IIC of the TDS prompts the seller to disclose any knowledge of substance that may be an environmental hazard, including lead-based paint.

Despite these numerous tasks, sellers may be glad to know there are some other things they need not do. A seller has no obligation under this law to conduct any evaluation, reduction, or elimination of lead-based paint hazards.

The Lessor's Obligations. With one exception, lessors of target housing must perform the same tasks for their tenants as sellers must perform for their buyers (as discussed above). The one exception is that lessors are not legally required to provide tenants with an opportunity to inspect the property for lead-based paint or lead-based paint hazards.

The Agent's Duties. Agents involved in sales or lease transactions have three general responsibilities. First, agents must inform sellers/lessors of their obligations under this law. Second, agents must ensure that sellers/lessors have complied with their obligations, or personally ensure compliance. An agent who performs these first two tasks will not be responsible for any lead-based paint or lead-based paint hazards that the seller or lessor knows, but fails to disclose to the agent.

Third, the agent must provide a statement that: (1) The agent has informed the seller of the seller's obligations; and (2) The agent is aware of his or her own duty to ensure compliance.

PRACTICE POINTER. The agent's three general responsibilities are all set forth in the Listing Agent's section of C.A.R.'s Lead-Based Paint and Lead-Based Paint Hazards Disclosure, Acknowledgment and Addendum (Form FLD).

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The Homeowner's Guide To Earthquake Safety And The Commercial Property Owner's Guide To Earthquake Safety

Overview. Given the notoriety of California's earthquakes, requiring sellers to tell buyers there might be an earthquake may seem unnecessary. However, the intent of this disclosure law is to teach people how to ensure the strength of their properties, because our past experiences have proven that earthquake-preparedness saves lives and property. To accomplish this goal, the California Seismic Safety Commission drafted the Homeowner's Guide and the Commercial Guide to provide general information about earthquakes, and specific information about how to find and fix earthquake-related weaknesses in real properties.

PRACTICE POINTER. C.A.R. publishes a three-part booklet which includes, as the third part, The Homeowner's Guide to Earthquake Safety. The other two sections in this three-part booklet are Residential Environmental Hazards: A Guide for Homeowners, Buyers, Landlords and Tenants and Protect Your Family From Lead in Your Home, both discussed above. For commercial properties, you may view The Commercial Property Owner's Guide to Earthquake Safety. There are also signature pages for the commerical booklet.

Applicability. The earthquake booklets are mandatory disclosures for the following transactions:

Homeowner’s Guide. Unless exempt, a seller must deliver the Homeowner's Guide if the property:

Commercial Guide. Unless exempt, a seller must deliver the Commercial Guide if the property:

EXCEPTIONS : The exemptions to this law are generally, but not exactly, the same as the TDS exemptions. The exemptions to both the Homeowner's Guide and Commercial Guide are as follows:

• Transfers in subdivisions subject to the public report requirement.

The Seller's Duties. Sellers must provide the Homeowner's Guide or Commercial Guide, where applicable, to their buyers as soon as practicable before transfer of title. Sellers providing the Homeowner's Guide have one additional task. They must complete and deliver the Residential Earthquake Hazards Report, which is a short questionnaire about the structural deficiencies and earthquake weaknesses, if any, in the property.

PRACTICE POINTER. The Residential Earthquake Hazards Report is a one-page form found in the back of the Homeowner's Guide to Earthquake Safety.

Delivery of the Homeowner's Guide or Commercial Guide will be deemed to be adequate to inform a buyer about geologic and seismic hazards, in general, described in that booklet, and mitigating measures that might be considered. No additional information is needed. This valuable shield from liability pertains to both sellers and their agents.

PRACTICE POINTER. This liability shield is apparently applicable to all transfers of real property. Thus, even if a certain transaction is exempt, the seller and agent may nevertheless want to benefit from the protection by delivering the Homeowner's Guide or Commercial Guide.

The Agent's Duties. This law requires the real estate agent to provide the Homeowner's Guide to the seller, who, in turn, is obligated to give it to the buyer.

You may provide the following 3 booklets using the WRG 3-part Combined Hazards booklet, or you may provide them separately.

You will also find the required Signature pages for the Combined Natural Hazards and Earthquake Safety reports.

The 3 booklets are:

• Part 1 is the Residential Environmental Hazards booklet. The law expressly shields a seller and agent from liability by deeming delivery of the booklet as adequate in informing the buyer about common environmental hazards. There is also a Residential Enviornmental Hazard booklet available in Spanish.

• Part 2 is "Protect Your Family From Lead in Your Home," and required for most residential properties built before 1978, including REO sales. There is also a Protect Your Family From Lead in Your Home available in Spanish.

• Part 3 is the Homeowner’s Guide to Earthquake Safety (and the Residential Earthquake Hazards Report). Although an REO sale is exempt from this disclosure requirement, delivery is highly advisable as the law deems it as adequate in informing the buyer about geologic and seismic hazards in general. There is also a Homeowner's Guide to Earthquake Safety available in Spanish.

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Military Ordnance Locations

Overview. A military ordnance is a major issue in some communities. Military ordnance locations are areas officially designated as former military training grounds which contain potentially explosive munitions. Underground explosives in former military installations have, in the past, resulted in some serious tragedies, including the loss of lives. Addressing this problem, the California legislature enacted a law requiring disclosure of these military ordnance locations.

Applicability. This law applies to residential sellers of one-to-four units subject to the TDS law who have actual knowledge of any military ordnance locations within one mile of the property. The same rule applies to landlords of residential properties.

PRACTICE POINTER. Even if certain sellers are legally exempt from this disclosure requirement, it is always prudent for sellers and agents of any property to disclose actual knowledge of what may be construed as a material fact affecting the value or desirability of that property.

The Seller's Or Landlord's Duty. For sellers, any actual knowledge of a military ordnance location within one mile of the property must be disclosed in writing as soon as practicable. For residential landlords, the disclosure must be made in writing before entering into a rental agreement. This law only requires the disclosure of the seller/landlord's actual knowledge, and so sellers/landlords apparently have no duty to investigate the existence of military ordnance locations.

PRACTICE POINTER. Sellers may use the Comments section of the TDS to disclose the presence of a nearby military ordnance location. Landlords using C.A.R.'s Residential Lease or Month-to-Month Rental Agreement may check the box in the Military Ordnance provision if applicable.

The Agent's Duties. This law does not specifically impose any duty to real estate agents. However, a real estate agent must always disclose material facts affecting the value or desirability of a property.

The Buyer's Rights. Because the military ordnance disclosure is part of the TDS law, the buyer has a three-day right to rescind after delivery in person, or five days after delivery by mail.

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Industrial Use Zoning

Overview. When a municipality designates an area for commercial or industrial use, the law is highly unlikely to construe normal business operations in that area as a nuisance, even though homes nearby may be adversely affected. So to address this issue, the California legislature enacted a law requiring disclosure of commercial and industrial zones to protect unsuspecting buyers.

Applicability. This disclosure law applies to sellers of residential properties with one-to-four dwelling units subject to the TDS. The exemptions are the same as the TDS exemptions.

The Seller's Duties. A seller subject to this law must disclose any actual knowledge that the property is affected by or zoned to allow commercial, manufacturing, or airport uses. This disclosure must be made in writing as soon as practicable before the transfer of title. This law only requires the disclosure of the seller's actual knowledge, so there's no duty to investigate the existence of industrial zones.

PRACTICE POINTER. Sellers may use the Comments section of the TDS to disclose commercial, manufacturing, or airport use in the vicinity of the property.

The Agent's Duties. This particular law does not specifically impose any duty to real estate agents. However, a real estate agent must always disclose material facts affecting the value or desirability of a property.

The Buyer's Rights. Because the industrial zone disclosure law is part of the TDS law, the buyer has a three-day right to rescind after delivery in person, or five days after delivery by mail.

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Illegal Controlled Substances

Overview. What does it matter if illegal controlled substances were once released in a property? The answer is safety.

Nowadays, people can manufacture illegal drugs, most commonly methamphetamine, in the privacy of their own homes using legal, over-the-counter products and any of the hundreds of recipes available on the Internet. However, for every pound of "meth" produced, there are a lot more pounds of unwanted chemical by-products. These potentially toxic chemical by-products can end up anywhere, such as down the sink and toilet, in the floors, in the backyard, and even in the paint and plaster. Homes used as drug labs become potential hazardous waste sites requiring evaluation and possibly cleanup by hazardous waste professionals.

Applicability. This disclosure law applies to sellers of residential properties with one-to-four dwelling units subject to the TDS. The exemptions are also the same as those under the TDS law. This law also applies to landlords of residential dwelling units.

The Seller's Duties. A seller subject to this law must disclose any actual knowledge of the release of an illegal controlled substance on or beneath the property. "Release" means any spilling, pouring, emitting, disposing, you get the idea, of an illegal controlled substance in a structure or into the environment. "Illegal controlled substances" for purposes of this law excludes marijuana.

This disclosure must be made in writing by: (1) Checking "yes" in question IIC1 of the TDS, indicating that the seller is aware of substances in the property that may be an environmental hazard; and (2) Attaching a copy of any notice received from a governmental agency advising the owner of the release. Delivery of this information will be deemed legally adequate to inform the buyer of that condition. No additional information is needed.

A seller who knowingly and willfully fails to provide written notice to the buyer under this law may be held liable not only for actual damages and other legal remedies, but also civil penalties up to $5,000 for each violation.

The Landlord's Duties. The law pertaining to landlords is the same as that for sellers as discussed above, except that the landlord must disclose before entering into a rental agreement by providing the tenant with a copy of any notice received from a governmental agency advising of the release.

The Agent's Duties. This particular law does not specifically impose any duty to real estate agents. However, a seller's agent must always disclose material facts affecting the value or desirability of a property.

The Buyer's Rights. Because this law is part of the TDS law, the buyer has a three-day right to rescind after delivery in person, or five days after delivery by mail.

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Registered Sex Offenders

Overview. In 1994, seven-year old Megan Kanka was raped and murdered by the man who lived across the street in a small, suburban neighborhood in New Jersey. No one in the neighborhood knew he was a twice-convicted sex offender. This tragedy sparked the enactment of Megan's Law in many states throughout the country. In California, Megan's Law provides public access to a database of the whereabouts of dangerous sex offenders. It further authorizes local law enforcement to notify members of its community that high-risk and serious sex offenders live in the neighborhood. These laws gave rise to a new disclosure requirement.

Applicability. This law applies to residential sellers of properties with one-to-four units and residential landlords. There are no exemptions, except for certain subdivisions.

The Seller's And Landlord's Duties. Sellers and landlords subject to this disclosure law must ensure that their sales or rental agreement contains, in at least 8-point type, a statutory notice about the availability of a database of registered sex offenders. The notice informs buyers/tenants that the public has access to a database of the location of registered sex offenders through a "900" telephone service.

PRACTICE POINTER. C.A.R.'s California Residential Purchase Agreement (Form
RPA-CA) and other purchase agreements, as well as its Residential Lease or Month-to-Month Rental Agreement (Form LR) both include the required database disclosure notice.

Delivery of the statutory notice is deemed to be adequate to inform the buyer or tenant of the existence of a statewide database of the locations of registered sex offenders and information from the database about those locations. No additional information about the proximity of registered sex offenders is required.

The Agent's Duties. This law does not have any specific requirements for real estate agents. Delivery of the database disclosure, however, shields not only the sellers and landlords from liability, but the agents as well.

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Toxic Mold

Overview. Mold is everywhere. It’s in the air and in our homes. These microscopic organisms have been with us since the beginning of time. In recent years however, there's been concern about the potential health impacts of indoor mold. Those health impacts can range from allergic reactions, headaches, fatigue, to even death. See the Mold Guide produced by the U.S. EPA. This Mold Guide is available in Spanish.

San Diego Mold Disclosures are available as well as Generic Mold Disclosures.

Laws are now evolving to ensure that buyers and tenants of real property understand the potential risks of mold, and are not exposed to them unnecessarily. California's most noteworthy attempt to date at addressing mold hazards is the Toxic Mold Protection Act. This legislation gives rise to possible new disclosure requirements that may arise in the future depending on the results of studies to be conducted by the California Department of Health Services (CDHS).

Applicability. New disclosures under this law would potentially affect:

PRACTICE POINTER. Even if mold disclosure requirements are not mandatory , it would be prudent for any seller or agent with actual knowledge to disclose the presence of mold because that information is likely to be construed as a material fact affecting the desirability of the property.

Residential Sellers. This law does not apply to residential sellers. However, in 2002, the California legislature amended the TDS law to address the concern about mold. Question IIC1 of the TDS requires a residential seller to disclose any knowledge of substances that may be an environmental hazard, such as asbestos, formaldehyde, and radon gas. That list of environmental hazards now includes mold.

PRACTICE POINTER. Many sellers are concerned about their potential liability for indoor mold that they do not know about. You may want to remind them that, by law, the voluntary delivery of the booklet Residential Environmental Hazards: A Guide for Homeowners, Buyers, Landlords and Tenants, which includes a chapter on mold, will be deemed adequate to inform a buyer about the environmental hazards contained in that booklet.

The Landlord's Duties. Residential, commercial, and industrial landlords have the same disclosure duties as those for commercial and industrial sellers discussed above. Landlords also have additional duties as follows:

PRACTICE POINTER. It's prudent for residential landlords to give their tenants the booklet entitled Residential Environmental Hazards: A Guide for Homeowners, Buyers, Landlords and Tenants that includes information about mold.

The Agent's Duties. This law does not create any new duties for real estate agents. However, agents of residential properties of one-to-four units have a pre-existing duty to conduct a reasonably competent and diligent visual inspection, and disclose all material facts revealed by that investigation. Agents should be careful in carrying out this duty. Unlike other environmental hazards which are undetectable to the naked eye (e.g., asbestos, radon gas, lead-based paint), some mold conditions may be detectable through visual inspection.

PRACTICE POINTER. To minimize potential liability, if any, agents may provide buyers with C.A.R.'s Buyer's Inspection Advisory (Form BIA). This advisory explains to buyers that agents have no expertise in hazardous substances, and encourages buyers toconduct their own inspections for environmental hazards, including mold.

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Summary Disclosure Chart for Realtors®

Summary Disclosure Chart for Realtors® is designed to provide Realtors® and their clients with an easy-to-use reference guide for determining the applicability of the state and federal laws to real estate transactions most commonly handled by real estate licensees.

Summary Disclosure Chart for Realtors® provides a disclosure "trigger" as well as a brief summary of the disclosure requirement, but does not cover all disclosures required by law. Some of the disclosures addressed in this chart, though generally applicable to a articular type of transaction, may be subject to exceptions which, unless otherwise noted, are not addressed in this publication. Certain transactions may be subject to additional disclosure requirements .

To view the Summary Disclosure Chart for Realtors®, click here.

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New Home Disclosure Chart for Realtors®

This disclosure chart is intended to assist Realtors® who sell new residential construction of one-to-four units including condominiums, condominium conversions, and other common interest developments as well as standard subdivisions whether or not they are subject to the Subdivided Lands Law.

This disclosure chart is a brief summary of the disclosure requirement, but does not cover all disclosures required by law.

Certain transactions may be subject to additional disclosure requirements .

To view the New Home Disclosure Chart for Realtors®,click here.

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Disclosure Chart for REO Property Sales

The Disclosure Chart for for REO Property Sales (for Residential 1 - 4 Unit Properties), is designed to provide REALTORS® and their clients with an easy-to-use reference guide for determining the general applicability of the law to these types of sales transactions. To view the Disclosure Chart for REO Property Sales,click here.

The same information is available in the Sales Disclosure Chart for REALTORS® and greater detail can be found regarding the disclosure triggers in the Summary Disclosure Chart for REALTORS®.  For example, the chart may indicate a "yes" for the Lead-Based Paint disclosure requirement; however, it is only required for properties built before 1978.  The more detailed requirements can be found in the Summary Disclosure Chart for REALTORS®.

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