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A buyer purchased a “spec” home from a builder. In the purchase Contract the builder represented that the “spec” home could have gas appliances. After close of escrow the buyer learned that the builder had not run the gas line from the street to the meter on the buyer’s property. Although the builder admits that there was no disclosure of the lack of a gas line, the builder contends that the builder has no liability because the buyer had the opportunity during the inspection period to confirm the existence of a gas line. Does the builder have liability for non-disclosure for the lack of a gas line?

ANSWER:

Probably. If a seller knows of a material fact affecting the value of the property and knows that this material fact is not known to the buyer, the seller has a legal duty to disclose this material factHill v. Jones, 151 Ariz. 81, 725 P.2d 1115 (App. 1986). Therefore, the builder had an obligation to disclose to the buyer as a material fact that there was no gas line. Although the buyer could have confirmed the lack of a gas line during the inspection period, the builder still has liability for failing to disclose the lack of a gas line. See Barnes v. Lopez, 25 Ariz. App. 477, 544 P.2d 694 (App. 1976) (Seller still liable for zoning misrepresentation even though the buyer could have confirmed correct zoning.)

The buyer went through the inspection period and is set to close in two weeks. The property has a septic tank on it, which the seller disclosed. The seller now orders the septic tank inspection. The septic tank company notifies all parties that there are two septic tanks on the property. The seller did not know about the unused abandoned tank but updated the SPDS upon learning of the abandoned tank. The buyer does not want to close unless the seller agrees to have the abandoned tank removed. Can the buyer cancel if buyer discovers there is a septic tank that was not disclosed?

ANSWER:                

Probably.   A seller has a duty to disclose facts materially affecting the value of the property that is not readily observable and is not known to the buyer. See Hill v. Jones, 151 Ariz. 81, 725 P.2d 1115 (App. 1986). Although the buyer could have confirmed there was a second septic tank during the inspection period, the seller still has liability for failing to disclose the second septic tank. See Barnes v. Lopez, 25 Ariz. App. 477, 544 P.2d 694 (App. 1976) (Seller still liable for zoning misrepresentation even though the buyer could have confirmed correct zoning.)

Therefore, the buyer may cancel under section 4f, which provides the buyer a five-day opportunity to “disapprove” of the updated SPDS and cancel.

Note: There is a correct process to “abandon” a septic tank if it is no longer used.  Each County in Arizona has a form available online regarding how to abandon a septic tank properly.

If a seller knows that this material fact is not known to the buyer, the _____ this material fact.



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T O D I S C L O S E


A B C D E F G H I J K L M
N O P Q R S T U V W X Y Z

The out-of-state REO seller has an addendum to the purchase contract requiring the buyer to waive any disclosures, which would include the waiver of the Affidavit of Disclosure under A.R.S. §33-422. Can a buyer agree to waive the requirement of the Affidavit of Disclosure under A.R.S. §33-422?

ANSWER:

Probably not. Under A.R.S. §33-422 a seller shall provide to the buyer an Affidavit of Disclosure if the seller is selling five or fewer parcels of land in an unincorporated area of a county which is not subdivided land. This Affidavit of Disclosure applies to vacant, commercial, industrial and residential land.

In light of this mandatory language of A.R.S. §33-422, the buyer, for public policy reasons, probably cannot waive the right to receive from the seller an Affidavit of Disclosure. Otherwise, every seller subject to A.R.S. §33-422 would require a waiver of the Affidavit of Disclosure.

The broker represents a buyer in escrow, who just informed the broker that she recently quit her job as a teacher. The buyer still intends to complete the transaction with a $30,000 down payment towards the $55,000 purchase price, while financing the remainder. The buyer has some other sources of income, such as social security, but has not updated her disclosures to the lender. What disclosure obligations, if any, does the broker have?

ANSWER:

The broker may be required to disclose the loss of the buyer’s job to the seller and listing agent.  Pursuant to A.A.C. R4-28-1101(B)(2), a real estate licensee is required to “disclose in writing to all other parties any information the licensee possesses that materially or adversely affects the consideration to be paid…including…[a]ny information that the buyer or lessee is, or may be unable, to perform.”  Accordingly, if the buyer is unable to perform in light of the job loss, that fact must be promptly disclosed in writing to the seller and seller’s agent.

Quick Quiz

Fill in the Blank:

This of Disclosure applies to vacant, commercial, industrial and residential
.

The sellers sold their home to the buyers under a standard form purchase contract. Throughout the transaction, the buyers were aware that dogs and cats were present in the home. After close of escrow, the buyers complained of strong urine odor in the home. The sellers claim they were unaware of the odor. As a result, the sellers did not check box 201 of the Seller’s Property Disclosure Statement (SPDS) disclosing the presence of an odor. The buyers are now claiming a lack of disclosure and requesting that the sellers pay for new carpeting throughout the home. Are the sellers liable to the buyers for a lack of disclosure?

ANSWER:

Probably not.  Assuming the sellers were actually unaware of the presence of an odor in the home, the sellers had no cause to disclose an odor in the SPDS. Moreover, the buyers were aware of the presence of the animals that are claimed to be the cause of the odor and were afforded an inspection period. If the potential for pet odors was of concern to the buyers, that issue should have been examined and addressed in the Buyer’s Inspection Notice and Seller’s Response (BINSR). Upon the buyers’ failure to give notice of disapproval in the BINSR, pursuant to Section 6j of the purchase contract, the buyers are conclusively deemed to have opted to proceed with the transaction without a correction of any pet odors on the property.

Escrow is set to close in three days. The seller has significant amounts of personal property in the residence and is apparently making no effort to pack or otherwise get ready to move. The buyer’s agent is afraid that the seller may not leave at closing as required. Should the buyer’s agent advise the buyer of this issue?

ANSWER:

Yes.  The licensee is obligated to disclose to the client all material facts, including those suggesting that the seller may be unable or willing to perform. See A.A.C. R4-28-1101. Here, because it looks like the seller may not vacate the premises timely, the buyer’s agent should advise the buyer of this fact.