Unique Factors and Conditions Affecting Property and Seller’s Neighborhood Security Disclosure – Form 308 and 321

External material facts affecting the property’s value

A broker and their agent, with authority to exclusively representative a seller of a one-to-four unit residential property, takes reasonable steps to promptly gather all material facts about the property which are readily available to the seller, the seller’s broker or the broker’s agent. Further, the broker’s and agent’s duty owed the seller to disclose to prospective buyers material facts known to them is not limited merely to disclosures of the property’s physical condition.

When the seller or seller’s agent considers property disclosures, there are two operative phrases from case law to keep in mind:

  • readily available information; and
  • relevance to a buyer’s decisions.

In addition to a property’s physical condition, neighborhood and area conditions which adversely affect the property’s value and desirability are also considered material facts. Disclosure of facts yielding a negative effect on the value of property is required regardless of whether the negative effect is explicitly stated on a pre-printed transfer disclosure statement (TDS) form. Anything less is deceit, and thus a fraud on the buyer by the seller’s broker and agent. [Calif. Civil Code §§1102(a), 1102.3, 1102.8; see RPI Form 304]

Area factors and conditions known to the seller or the seller’s broker or agent which negatively affect a property’s value and desirability are disclosed to prospective buyers as soon as practicable (ASAP) — i.e., before a purchase agreement is entered into by the seller. In addition to the TDS, the seller’s broker discloses external factors unique to the subject property or surrounding area which affect a property’s value by using a disclosure form which specifically references the condition.

Unique factors and conditions

The Unique Factors and Conditions Affecting Property form published by RPI (Realty Publications, Inc.) is used by a seller’s agent when preparing a marketing package for the sale, exchange, lease or option of a one-to-four unit residential property, to disclose to prospective buyers the existence of unique factors or conditions which may adversely affect the property or its immediate vicinity. [See RPI Form 308]

The Unique Factors and Conditions Affecting Property form lists several factors which may influence a buyer’s decision to purchase or the price they are willing to pay for a particular property. These factors and conditions include:

  • Notice of Airport in Vicinity – the property may be subject to some of the annoyances or inconveniences associated with proximity to airport operations [See RPI Form 308 §2];
  • Notice of Right to Farm – the property is located within one mile of a farm or ranch land designated on the current county-level GIS “Important Farmland Map,” issued by the California Department of Conservation, Division of Land Resource Protection [See RPI Form 308 §3];
  • Notice of San Francisco Bay Conservation and Development Commission Jurisdiction – the use and development of property within the commission’s jurisdiction may be subject to special regulations, restrictions and permit requirements [See RPI Form 308 §4];
  • Notice of Mining Operations – the property is located within one mile of a mine operation for which the mine owner or operator has reported mine location data to the Department of Conservation pursuant to Public Resources Code §2207 [See RPI Form 308 §5];
  • Notice of Industrial Use Zone – the property is located in or next to an Industrial Use Zone which allows manufacturing or commercial uses, or is affected by a nuisance resulting from its proximity to an Industrial Use Zone [See RPI Form 308 §6];
  • Notice of State or Federal Ordnance – the property is located within one mile of a former state or federal ordnance location, such as those used for military training purposes [See RPI Form 308 §7];
  • Notice of Contamination of a Controlled Substance – the property or immediate vicinity has been identified by a governmental health official as being contaminated by methamphetamine or another controlled substance or was the site of a former meth lab [See RPI Form 308 §8];
  • Notice of Death – a death has occurred on the property within the prior three years [See RPI Form 308 §9];
  • Notice of Insurance Claim Affecting the Property – an insurance claim affecting the property has been filed within the previous five years [See RPI Form 308 §10]; and
  • Notice of Other Conditions Affecting the property or immediate vicinity. [See RPI Form 308 §11]
Criminal activity and a the property’s value to a buyer

When preparing disclosures, most sellers and their agents willingly neglect to provide information about recent criminal activity within the neighborhood — whether known or suspected. Their faulty justification: criminal activity is not listed as a boilerplate item in the TDS form, a defect it suffers, and is not a provision in outdated purchase agreements published by the California Association of Realtors® (CAR) seller’s agents frequently use. [See RPI Form 304]

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) have no public policy legislation to rely on for 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 the seller’s agent fails in the duty they owe to their seller to provide relevant property information to prospective buyers by disclosing criminal activity within the neighborhood, it becomes the responsibility of a buyer’s agent to request criminal history of the area from the seller’s agent and review it with the buyer.

The Seller’s Neighborhood Security Disclosure Addendum published by RPI 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 or readily available about security conditions on or 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, attached 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 under case law when information is “readily available” and “relevant to a buyer’s decision.” Thus, the seller’s disclosure is just good practice — it’s a legally critical supplement to the statutory TDS.

Each section in Form 321 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]

When a buyer’s agent reviews the Seller’s Neighborhood Security Disclosure with their buyer, the buyer’s agent will discuss any disclosures or findings they have made with the buyer. Any costs of providing additional security for their 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.

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. [See RPI Form 304, 308 and 321]