When and when not to disclose

A seller’s agent employed by a seller located a buyer for the seller’s real estate. Prior to making an offer, the seller’s agent hands the buyer the seller’s Transfer Disclosure Statement (TDS). The TDS discloses the seller’s and agent’s knowledge about the present physical condition of the property. All other mandatory property and transaction disclosures are made.

The buyer does not inquire into any deaths which might have occurred on the property. Ultimately, the buyer acquires and occupies the property.

Later, the buyer is informed a prior occupant died on the property more than three years before the buyer submitted their purchase offer. The buyer would not have purchased the property had they known about this event.

The seller’s agent has no affirmative duty to voluntarily disclose information to a potential buyer regarding a prior occupant:

  • whose death, from any cause, occurred on the real estate more than three years prior to the purchase offer; or
  • who was afflicted with the HIV virus or AIDS. [Calif. Civil Code §1710.2(a)]

Editor’s Note – Deaths on the property which occurred within three years of the offer are treated differently. Further, the buyer’s and seller’s agents have an affirmative duty to disclose prior deaths, regardless of when they occurred, when the death has an adverse effect on the property’s market value. [Reed v. King (1983) 145 CA3d 261]

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Disclose on inquiry

Regardless of whether a death occurred within three years of the buyer submitting a purchase offer,  the seller’s agent is to disclose their knowledge of any deaths on the real estate upon direct inquiry by the buyer or their agent. [CC §1710.2(d)]

An intentional misrepresentation or concealment of a known fact after a buyer makes a direct inquiry is:

  • a breach of the seller’s agent’s general duty owed to the buyer to truthfully respond when the seller’s agent represents the seller exclusively; or
  • a breach of the buyer’s agent’s agency duty owed to the buyer since the agent is the buyer’s representative in the transaction. [CC §1710.2(d)]

Further, an inquiry by the buyer into deaths indicates a death on the premises is a fact which might affect the buyer’s use and enjoyment of the property. Thus, a death occurring on the property is a material fact.

On an inquiry into deaths by a buyer, an affirmative duty is imposed on the buyer’s agent to either:

  • investigate the death; or
  • recommend an investigation by the buyer before an offer is made, unless the offer includes a further-approval contingency on the subject of death.

An agent who discloses, on inquiry, that they do not know if a death occurred on the real estate is to hand the buyer a memorandum stating:

  • the buyer has made an inquiry about deaths on the property;
  • the agent has disclosed all their knowledge concerning the inquiry; and
  • whether the agent or others will further investigate any deaths on the property.

Desirability based on events within three years

Consider a buyer’s agent who is aware a death occurred on the real estate within three years of a buyer’s purchase offer.

The value of the property is not adversely affected by the death. Thus, the death is not a material fact about the property which needs to be disclosed.

The buyer does not ask their agent if any deaths have occurred on the property. After closing, the buyers learns of the death and is deprived of the pleasurable use and enjoyment of the property. The buyer’s attitude about death is an idiosyncrasy which was unknown to their agent.

The buyer claims their agent breached their agency duty by failing to disclose the death since it inflicted an intangible harm on the buyer, preventing them from enjoying the real estate.

Here, the buyer’s agent ought to determine if a known death might affect the buyer’s decision to purchase the property. The buyer’s agent has a great agency of duty to care to protect the buyer than the seller’s agent. Thus, a buyer’s agent discloses any death occurring on the property within three years or otherwise, especially if they believe the death might affect the buyer’s decision to make a purchase agreement offer.

It is the buyer’s agent’s duty to investigate and disclose material facts about the property and the transaction. Thus, a greater burden is placed on the buyer’s agent to know and understand their client, known as the know-your-client rule.

Additionally, buyers have a duty of care owed to themselves. Buyers themselves have a duty to inquire and discover facts readily available to them or their agent in an effort to protect their own personal interests.

This article was originally published in September 2013 and has been updated.