New California law clarifies real estate disclosure requirements

California’s legislature has passed a new law clarifying the requirements for real estate disclosure statements.

Assembly Bill (AB) 2960 ensures disclosure requirements in effect on the date parties enter into an agreement apply. Any changes to the disclosure statement after the parties have entered into an agreement will not apply.

This clarification stems from multiple questions surrounding newly enacted provisions. For example, when a seller and buyer enter into an agreement on December 20, 2022, and a new disclosure provision becomes effective on January 1, 2023, does the seller need to amend their disclosure? Additionally, when the seller fails to amend the disclosure, will the buyer be able to hold the seller liable?

With the new clarification, the answer to both these questions is a resounding no.

Disclosures required

These new requirements apply to all mandated real estate disclosures, including those for a purchase agreement.

For example, sellers complete and deliver to prospective buyers a statutory form called a Transfer Disclosure Statement (TDS), also known as a Condition of Property Disclosure Statement. [See RPI Form 304]

Here, a seller is required to prepare a TDS with honesty and good faith regarding any property defects known or suspected. When the property was built before 1960, the seller also delivers a Residential Earthquake Hazards Report, identifying any weaknesses to earthquakes within the property. [See RPI Form 150 §11.7; RPI Form 315]

Additionally, sellers of properties built before 1978 are required to include a Lead-Based Paint Disclosure. [United States Code §4852d; See RPI Form 150 §11.7; RPI Form 313]

The seller also prepares the Natural Hazard Disclosure Statement (NHDS) on the property, paid for by the seller, and reviewed and signed by the seller and the seller’s agent. The NHDS discloses where a property is subject to natural hazards. [See RPI Form 314]

The Agency Law Disclosure is an attachment agents use when preparing a listing agreement, purchase agreement, or a counteroffer on the sale or exchange of residential property, commercial property, or mobilehomes, to comply with the agency law disclosure law regarding the conduct of real estate licensees. [Calif. Civil Code §§2079 et seq.; See RPI Form 150 §15.3; RPI Form 305]

By clarifying disclosure requirements, this new bill ensures real estate professionals will avoid being entangled in disputes when the state amends mandated disclosures.

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