Seller disclosure has become an important element in all residential real estate transactions. Maryland and the District of Columbia recently revised the legal requirements involving disclosure when property is sold. Buyers, sellers, and real estate brokers and agents should become familiar with the new procedures and the new forms.
For many years, sellers of single-family residential property could choose to either fully disclose known conditions and defects in their house, or they could disclaim disclosure. In other words, when disclaiming, sellers could advise their prospective buyers, in writing, that the "owner of the real property . . . makes no representations or warranties as to the condition of the real property . . . and the purchaser will be receiving the property 'as is,' with all defects which may exist."
The Maryland law has changed. Effective Oct. 1, even if a seller chooses to disclaim disclosure, latent defects of which the seller has knowledge must nevertheless be disclosed.
A "latent defect" is defined as a material defect in real property or an improvement to real property that: "(1) a purchaser would not reasonably be expected to ascertain or observe by a careful visual inspection of the real property, and (2) would pose a direct threat to the health or safety of . . . the purchaser or . . . an occupant of the real property, including a tenant or invitee of the purchaser."
Real estate contracts must include a "conspicuous notice advising the purchaser of his rights to receive the disclosure/disclaimer statement."
The new form is available through the Maryland Real Estate Commission at its Web site (www.dllr.state.md.us/license/occprof/recomm.html).
The Oct. 1 date is critical. If a seller signs a sales contract on Sept. 20 but does not provide the old form to the purchaser by Sept. 30, the seller must use the new form. On the other hand, if the purchaser has already been given the old form, the law does not appear to require that a revised form be furnished to the buyer. However, to stay on the safe side, cautious sellers would be well advised to comply with the new law and provide the new form.
One point: If there is a real estate broker or agent involved in the transaction, and if he has personal knowledge of any latent defects, he is legally obligated to disclose those defects to the potential purchaser, no matter whether the seller discloses or disclaims.
There are several exceptions to the disclosure requirement. For example, sellers of new homes that have never been occupied -- or for which a certificate of occupancy has been issued within one year before a sales contract is entered into -- are not required to provide any disclosures.
Additionally, if a fiduciary involved in the administration of a decedent's estate, guardianship, conservatorship or trust conveys property, no disclosures are required.
The law in the District requires most sellers to disclose a number of issues relating to the property that is being sold. Unlike in Maryland, District property owners do not have the option to disclaim disclosure.
Recently, the District's Board of Real Estate issued a temporary update to the required Seller's Disclosure form. Three new questions dealing with historic districts have been added.
Sellers now also must disclose if the property is a D.C. landmark or located within a historic district; whether the property has been cited for a violation during the period that the seller owned the property, and whether the property is subject to a conservation easement.
According to the Board of Real Estate, the old form is obsolete and the new form must be used, effective immediately. However, I was unable to locate the revised form on the District's Web site.
There are a number of exemptions to the disclosure requirement:
* Court-ordered transfers of property.
* Transfers made by a non-occupant fiduciary administering a decedent's estate, guardianship, conservatorship or trust. Note the distinction between the District and Maryland. In the District, if the fiduciary is living in the property at the time a sales contract is entered into, disclosures must be provided to a buyer.
* Transfers between spouses under a divorce decree or a property settlement agreement incidental to a judgment.
Sellers anywhere should not be afraid to disclose known problems in their houses. It is better to disclose now than be hit with a lawsuit by a buyer after he discovers that there are defects in the property and that the seller knew -- or should have known -- about problems before the property was transferred.
You can never go wrong in telling the truth about your house.
Benny L. Kass is a Washington lawyer. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed stamped envelope to Benny L. Kass, Suite 1100, 1050 17th St. NW, Washington, D.C. 20036. Readers may also send questions to him at that address.