The Seller's Obligation to Disclose to the Buyer
By K. Michelle Lind
Posted: July 2002 ~ Reviewed April 2010
A seller of real property has certain disclosure obligations to the buyer. These disclosure obligations originate from both common law and statute.
The Seller's Common Law Duty to Disclose
A seller has a duty to disclose facts materially
affecting the value of the property that are not readily observable and
are not known to the buyer. This duty was delineated by the court in Hill
v. Jones, 151 Ariz. 81, 725 P.2d 1115 (App. 1986).
After close of escrow in the Hill case, the
buyers learned from a neighbor that the house had past termite
infestation, and the buyers discovered that part of the wood flooring was
crumbling. When the lawsuit was filed, the buyers learned that the sellers
had received two termite guarantees from the previous owner, had treated
the house twice for termites and that existing termite damage had not been
repaired. In examining the case, the court announced the seller's duty to
disclose material facts to the buyer in Arizona and stated that under
certain circumstances nondisclosure of a known fact may be equivalent to
the assertion that the fact does not exist. Therefore, nondisclosure may
be equated with and given the same legal effect as fraud and
The Seller's Statutory Duty to Disclose
In addition to the common law duty to disclose, there are an ever-increasing number of specific disclosures that sellers are required by statute to make, such as:
The SPDS Assists in Making these Disclosures The Arizona
Association of REALTORS® ("AAR") Seller's
Property Disclosure Statement ("SPDS") is designed to assist
sellers in making these legally required disclosures and to avoid
inadvertent nondisclosures of material facts. The first page of the SPDS
is a Seller
Advisory to help educate sellers about their disclosure obligations
and to assist sellers in completing the form.
Does the SPDS unfairly "shift the risk" from the listing broker to the seller?
No. The seller has an obligation to make the required disclosures regardless of whether the seller is represented by a broker or uses the SPDS.
Are all the questions on the SPDS material in every transaction?
No. Some of the questions on the SPDS are simply for informational purposes. What is material depends on the facts and circumstances of the transaction.
If the seller answers the questions on the SPDS that are not material in that particular transaction, is the seller harmed?
No. To coin a phrase: if it is material, the seller must disclose it; if it is not material, why not disclose it?
Since every question on the SPDS may not be material, wouldn't it be better if sellers made their disclosures of material fact on a blank piece of paper, rather than utilizing the SPDS form?
If a seller could remember all the material details of the property that need to be addressed, a writing would suffice. However, the SPDS serves to address statutory disclosures of which the seller may not be aware, to prompt the seller to disclose information the seller may not realize is material, and to assist the seller to make these disclosures fully and accurately.
Does the SPDS operate as a "warranty" of the condition of the property?
No. The SPDS is not a warranty, but simply a disclosure of facts of which the seller is aware. The SPDS requires the buyer to acknowledge that the information in the SPDS is based only on the seller's actual knowledge and is not a warranty of any kind. (See SPDS line 233)
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