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Reyne Stapelmann: What is a Transfer Disclosure Statement?

Of the multitude of disclosures required by real estate licensees and sellers of residential property, few are as well known as the Real Estate Transfer Disclosure Statement, typically referred to as the TDS.  

Since 1987 sellers or other transferors of real property containing one to four residential units, and since 2000 sellers and other transferors of manufactured homes or mobile homes, have been required to furnish prospective buyers or other transferees with a completed TDS (MHTDS for manufactured/mobile homes) on a specific form prescribed by law — unless exempt. 

The TDS (or MHTDS) law may be summarized as follows: 

» Requires a seller of residential real property with one to four dwelling units including personal property mobile homes and manufactured homes to provide a buyer with a specified disclosure form about the property. CAR Forms TDS (for real property) and MHTDS (for manufactured homes and mobile homes) satisfy this requirement. 

» The TDS and MHTDS are statutorily-defined forms meaning the forms must contain the exact language provided in the statute. 

» Provides that if the disclosures or any material amendment to the disclosures are made to the buyer after execution of the offer to purchase, the buyer has three days after personal delivery of the disclosure form and five days if the form is delivered by mail from the time the form is deposited in the mail to terminate the purchase agreement. 

» Provides that neither the seller nor real estate agents are liable for any error or inaccuracy in the disclosure form provided that they had no personal knowledge of the error or inaccuracy, it was based on information provided by a public agency or a report prepared by certain specified professionals, and the seller and the real estate agents used ordinary care in providing the information. 

» Provides that when more than one real estate agent is involved in the transaction, the one who has obtained the offer (i.e., the selling agent) is responsible for delivery of the disclosure form to the buyer. 

» Provides that a transfer of real property shall not be invalidated by a failure to comply with these disclosure requirements; however, negligent or willful failure to comply will result in liability for any actual damages incurred.

The TDS and the MHTDS consist of Sections I through V that need to be completed. 

Section I provides space to list additional existing disclosure reports that the seller may have in his or her possession such as property inspection reports, pest reports, geologic reports or property insurance claims. 

Section II contains a vast checklist of items describing the property such as pool, sump pump, hot tub, etc. and has yes/no questions regarding any defects to the property. 

There is additional space provided for the seller to disclose any other material items that may affect the value or desirability of the property. 

Sections III and IV are to be completed by the listing agent and selling agent (if the parties are represented by agents).

Certain types of transfers are specifically exempted by Civil Code § 1102.2. The list  below lists the exemptions:

» Transfers requiring a public report pursuant to § 11018.1 of the Business and Professions Code and transfers pursuant to § 11010.4 of the Business and Professions Code where no public report is required. 

» Transfers pursuant to court order (such as probate sales, sales by a bankruptcy trustee, etc.). 

» Transfers by foreclosure (including a deed in lieu of foreclosure and a transfer by a beneficiary who has acquired the property by foreclosure or deed in lieu of foreclosure). 

» Transfers by a fiduciary in the course of the administration of a decedent's estate, guardianship, conservatorship or trust. An exception to this exemption occurs when the property is held in a revocable trust and the trustee is a natural person who is the sole trustee of the trust as well as the former owner of the property or an occupant in possession of the property within the year preceding the transfer. 

» Transfers from one co-owner to one or more other co-owners. 

» Transfer made to a spouse or to a child, grandchild, parent, grandparent or other direct ancestor or descendant. 

» Transfers between spouses in connection with a dissolution of marriage or similar proceeding. 

» Transfers by the State Controller pursuant to the Unclaimed Property Law. 

» Transfers as a result of failure to pay property taxes. 

» Transfers or exchanges to or from any government entity.

Taken from the California Association of Realtors.

Reyne Stapelmann is a broker associate with Berkshire Hathaway Home Services, California Properties and the 2015 president of the Santa Barbara Association of Realtors. Contact her at [email protected] or 805.705.4353. The opinions expressed are her own.

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