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This form is used by the seller and their agent when marketing a one-to-four unit residential property for sale in compliance with mandated disclosures on the physical and environmental condition of the property, to provide prospective buyers as soon as possible on the commencement of negotiations with property information including known or suspected property defects affecting value.

304

Your use of RPI Form 304

Mandated on one-to-four residential units

A seller of a one-to-four unit residential property completes and delivers to a prospective buyer a statutory form called a Transfer Disclosure Statement (TDS), more generically called a Condition of Property Disclosure Statement. [Calif. Civil Code §§1102(a), 1102.3; see RPI Form 304]

The seller’s use of the TDS form is mandated. The seller is required to prepare it making all entries with honesty and in good faith, whether or not a seller’s agent is retained to review its content. [CC §1102.7]

Editor’s note – A “condition of property” form does not exist for use in California which covers other than one-to-four unit residential property. However, RPI is in the process of producing a standardized condition of property disclosure form for the sale of other types of properties including commercial property later this year.

When preparing the TDS, the seller sets forth any property defects known or suspected to exist by the seller.

Any conditions known to the seller which might negatively affect the value and desirability of the property for a prospective buyer are to be disclosed in the TDS by the seller, even though the defect may not be a boilerplate item listed on the form. Disclosures to the buyer are not limited to conditions preprinted for comment on the form. [CC §1102.8]

Also, the buyer cannot waive the seller’s delivery of the statutorily-mandated TDS, even when it is not handed to the buyer before entering into a purchase agreement for the property. Any attempted waiver, such as the use of an “as-is” clause in the purchase agreement or counteroffer, is void as against public policy. The words “as is” are never to be used in the context of a real estate transaction. “As is” implies a failure to disclose something adverse about the property known to the seller or the seller’s agent, a prohibited activity. [CC §1102.1(a)]

A property is always sold “as disclosed” in the TDS.

Delivery of the disclosure statement

RPI’s Condition of Property – Form 304 is used by the seller and their agent when marketing a one-to-four unit residential property for sale. Its use complies with the content for mandated disclosures regarding physical and environmental conditions of the property. [See RPI Form 304]

While the seller is required to prepare the TDS, the TDS is delivered to the prospective buyer by the agent who has direct contact with the buyer when the purchase agreement is handed over by the buyer. In the instance of a principal-to-principal transaction negotiated directly between the seller and buyer without the participation of a transaction agent (TA), the seller is obligated to deliver the TDS to the buyer. [CC §1102.12]

The failure of the seller or any of the agents involved to deliver the seller’s TDS to the buyer does not invalidate a closed sales transaction. However, the seller and the seller’s broker are both liable for the actual monetary losses incurred by the buyer due to an undisclosed defect known to them or unknown to them due to their negligence. [CC §1102.13]

Further, the time for delivery of the TDS to the potential buyer is mandated to occur before the seller accepts a purchase agreement offer submitted by a buyer — as soon as practicable (ASAP) after negotiations by the buyer begin.

If the TDS is delivered to the buyer after the seller enters into a purchase agreement, the delivery is untimely, a violation of TDS rules. Here, the buyer has several remedies, including:

  • cancel the purchase agreement and any escrow on their discovery of undisclosed defects known to the seller or the seller’s agent and unknown and unobserved by the buyer or the buyer’s agent prior to acceptance [CC §1102.3];
  • make a demand on the seller to correct the defects or reduce the price accordingly before escrow closes [See RPI Form 150 §11.2]; or
  • close escrow and make a demand on the seller for the costs to cure the defects. [Jue Smiser (1994) 23 CA4th 312]

Mandatory inspection by the agents

A seller’s agent is obligated to personally carry out a competent visual inspection when they list a one-to-four unit residential property for sale. [See RPI Form 304]

Following their mandatory visual inspection, the seller’s agent reviews the TDS prepared by the seller, or prepares it themselves if the seller is exempt (as discussed below). In addition to observations, they may rely on specific items covered in a home inspector’s report they obtained on the property. [See RPI Form 130]

A buyer may only recover the cost to cure or loss of value resulting from an undisclosed and unknown defect that is observable by a reasonably competent broker during a visual on-site inspection. A seller’s agent conducting an inspection is expected to be as competent as the broker they represent.

A buyer of a one-to-four residential unit property has two years from the close of escrow to pursue the seller’s broker and agent to recover losses caused by the broker’s or agent’s negligent failure to disclose observable and known defects affecting the property’s physical condition and value. [CC §2079.4]

However, the buyer is unable to recover their losses from the seller’s broker if the seller’s broker or agent competently inspected the property and was unable to reasonably observe the defect and did not actually know it existed. [CC §1102.4(a)]

Exempt sellers, their agents and targeted properties

A seller’s agent is obligated to personally carry out a competent visual inspection when they list a one-to-four unit residential property for sale. [See RPI Form 304]

Following their mandatory visual inspection, the seller’s agent reviews the TDS prepared by the seller, or prepares it themselves if the seller is exempt (as discussed below). In addition to observations, they may rely on specific items covered in a home inspector’s report they obtained on the property. [See RPI Form 130]

A buyer may only recover the cost to cure or loss of value resulting from an undisclosed and unknown defect that is observable by a reasonably competent broker during a visual on-site inspection. A seller’s agent conducting an inspection is expected to be as competent as the broker they represent.

A buyer of a one-to-four residential unit property has two years from the close of escrow to pursue the seller’s broker and agent to recover losses caused by the broker’s or agent’s negligent failure to disclose observable and known defects affecting the property’s physical condition and value. [CC §2079.4]

However, the buyer is unable to recover their losses from the seller’s broker if the seller’s broker or agent competently inspected the property and was unable to reasonably observe the defect and did not actually know it existed. [CC §1102.4(a)]

Revision history

Updated 08-2017. Additional language concerning water-conserving plumbing fixtures has been added to the Seller’s Information in Part II as follows:

*Installation of a listed appliance, device, or amenity is not a precondition of sale or transfer of the dwelling. The carbon monoxide device, garage door opener, or child-resistant pool barrier may not be in compliance with the safety standards relating to, respectively, carbon monoxide device standards of Chapter 8 (commencing with Section 13260) of Part 2 of Division 12 of, automatic reversing device standards as set forth in Chapter 12.5 (commencing with Section 19890) of Part 3 of Division 13 of, or the pool safety standards of Article 2.5 (commencing with Section 115920) of Chapter 5 of Part 10 of Division 104 of, the Health and Safety Code. Window security bars may not have quick-release mechanisms in compliance with the 1995 edition of the California Building Standards Code. Section 1101.4 of the Civil Code requires all single family residences built on or before January 1, 1994, to be equipped with water-conserving plumbing fixtures after January 1, 2017. Additionally, on and after January 1, 2014, a single family residence built on or before January 1, 1994, that is altered or improved is required to be equipped with water-conserving plumbing fixtures as a condition of final approval. Fixtures in this dwelling may not comply with Section 1101.1 of the Civil Code.

Form navigation page published 08-2015.

Updated 08-2014. The Signature Section on page five has been restructured to better reflect the language of California Civil Code §1102 and allow more space for signatures.