Out of sight, out of mind

At a young age, the concept of crime and the insecurity it brings into life is not native, but is learned through news and entertainment media.  As we age, our experiences familiarize us with the concept of crime. We become permanently hardwired to act and respond to preserve personal security — the avoidance of situations that we sense will put us in danger of being a victim. It is there, deeply rooted in the instinct to protect oneself.

At some point in life, roughly two-thirds of California’s population become buyers of property used as the family abode. As buyers, they dislike uncertainty surrounding their occupancy and use of a property, especially conditions that affect their family’s likelihood of being the victim of a crime due to the property’s neighborhood.

Since they have either seen or heard about crimes in their lifetime, they mentally associate these things with the ownership of a property. Thus, their decision whether to buy a home in a particular neighborhood and what price to pay is tightly interwoven with personal security.

Resolving the unspoken uncertainty

In practice, a condition negatively affecting the value of a property, known or suspected to exist by the seller or the seller’s broker and agent, is to be disclosed to prospective buyers as soon as practicable (ASAP) after entering into purchase negotiations. For one-to-four unit residential properties, disclosures are made on the mandated Condition of Property Disclosure, commonly known as a Transfer Disclosure Statement (TDS). [Calif. Civil Code §§1102(a), 1102.3; see RPI Form 304]

However, most sellers and their agents, when preparing disclosures, willingly neglect to provide information about recent criminal activity within the neighborhood — whether known or suspected by either. Their faulty justification:

  1. criminal activity is not directly listed as a boilerplate item on the TDS form, a defect it suffers;
  2. criminal activity is not a provision in the outdated purchase agreements still published by the California Association of Realtors® (CAR), which its member agents frequently use; and
  3. the buyer never asked about the existence of criminal activity in the neighborhood.

As an agency rule, when you are employed by an owner to sell their property, both you as the licensee marketing the property and the seller as the owner have a general duty owed to prospective buyers to provide disclosures of all known facts affecting the value, use and desirability of the property.

Although the TDS is not specific to neighborhood security or criminal activity, the TDS calls for the seller to provide information regarding neighborhood nuisances. Neighborhood and area conditions which adversely affect the property’s value and desirability are material facts compelling disclosure to prospective buyers seeking further information about a property they might want to acquire.

Disclosure of facts yielding a negative effect on the value of property is required regardless of whether the negative effect is expressed as an item on a pre-printed TDS form or questioned by the buyer. Anything less is deceit, and thus a fraud on the buyer by the seller’s broker and agent. Nevertheless, this nuisance provision may not sufficiently jar a seller’s thoughts about security issues and past criminal activity to disclose information the prospective buyer needs and is entitled to when selecting a neighborhood or setting the price based on what they know about a property. [Calif. Civil Code §§1102(a), 1102.3, 1102.8]

Ongoing protection for the buyer

Today, tenants and owners of units in multiple-family properties are protected by landlord-tenant law against foreseeable criminal acts within the property. However, prospective homebuyers looking to purchase a detached single family residence (SFR) need to look to other than public policy legislation — the TDS — for compelling a notice of foreseeable criminal activity known or suspected by the seller or the seller’s agents. [Ann M. v. Pacific Plaza Shopping Center (1993) 6 CA4th 666]

When you as the seller’s agent fail in your duty owed to the seller to provide relevant property information to prospective buyers by disclosing criminal activity within the neighborhood, it places a burden on the buyer’s agent during the property due diligence analysis to demand the criminal history of the area for review with their buyer.

Readily available information

Purchase agreements are statutorily required to include a provision regarding the sex offender registry and its website, www.meganslaw.ca.gov. Thus, the legislature shifted to the buyer and their agent the responsibility to investigate the existence of sex offenders in the neighborhood surrounding the property. A diligent agent reviews this provision with their buyer, or researches the sex offender status of the neighborhood and advises their client on the results, especially if young children will reside in the property. [Calif. Penal Code §290.46, CC §2079.10a; see RPI Form 150 §11.16]

Another parallel website, www.crimereports.com, provides information volunteered by police departments about criminal activity in a given neighborhood, which also includes the location of registered sex offenders. These tools are an informative resource for a buyer’s agent to gather and pass value-affecting information to their clients.

Prudent practice by a seller’s agent is to obtain and attach these crime maps which are readily accessible from these websites to a neighborhood security disclosure addendum — an essential part of any property disclosure package. The local crime rate is part of a property’s attributes and always influences a buyer’s decision-making process — is it this location we buy and if so at what price? [See RPI Form 321]

The neighborhood security disclosure addendum

The Seller’s Neighborhood Security Disclosure Addendum published by RPI (Realty Publications, Inc.) is used by a seller’s agent when preparing a marketing package with information addressing security on or about a property they have listed for sale or lease, or on demand from a prospective buyer/tenant or their agent, to prepare a disclosure for delivery to prospective buyers of facts known, suspected or readily available about security conditions in the area of the property. [See RPI Form 321]

For the buyer, the Seller’s Neighborhood Security Disclosure is an addendum to the purchase agreement, referenced as part of a contingency provision requesting security information from the seller on their property and surrounding area. [See RPI Form 150 §11.10]

Although the disclosure of security conditions which exist on and around a property is not statutorily mandated, timely disclosure provides material information to the buyer when information is “readily available” and “relevant to a buyer’s decision,” as required by case law. Thus, the seller’s disclosure is not just good practice — it’s a legally critical supplement to the statutory TDS.

Each section in the Seller’s Neighborhood Security Disclosure Addendum has a separate principle relating to the security of the occupants of the property. The sections include:

  • a statement from the seller disclosing any investigative reports on the adequacy of the property’s security arrangements [See RPI Form 321 §2];
  • security precautions already undertaken, including steps taken by the seller or prior owner to prevent security breaches [See RPI Form 321 §3];
  • conduct on the property by a tenant, their pets or visitors which have endangered another person or the property of another [See RPI Form 321 §4]; and
  • any other specific criminal activity occurring during the past two years. [See RPI Form 321 §5]

Improving property security

When acting as the buyer’s agent, you review the Seller’s Neighborhood Security Disclosure with the buyer and discuss any disclosures or findings you have made with the buyer. Any costs of providing additional security for the buyer’s use of the property are then pointed out. Such items include the installation of:

  • extra lighting;
  • a security system;
  • security gates; and
  • fences and walls.

Landscaping may also contribute to security issues by providing hiding places for these would-be criminals, keeping them from plain view. Removal of bushes, low-hanging trees and other obstructive landscaping may be needed to provide security, adding to the buyer’s security expenses unless required for the seller to eliminate as a condition of closing.

When representing the buyer, your fiduciary duty is to care for and protect them. This duty includes a review of the seller’s disclosures on known criminal activity and security risks so your client may make as informed a choice about the property as possible. Whether or not the seller is forthcoming about criminal activity in the neighborhood, you need to take it one step further and gather the information directly from local law enforcement and neighbors.

After review and consideration of seller disclosures, the buyer is able to make an informed decision whether to proceed with the purchase, negotiate an adjustment in the price to cover the value of the disclosed risks, or cancel and find a property with fewer associated risks and costs. Avoidance of surprises for your buyer when the information is readily available on your request is a good deed always rewarded — by future business.