Question: Do trade union purchase agreements set the time line for delivering seller disclosures and completing buyer inspections?

Answer: Provision 14a and 14b of the purchase agreement published by the trade union arbitrarily sets a time period of 7 and 17 days for any delayed delivery of reports and disclosures about the condition of the property and its location, and the buyer’s response. However, the primary legislative intent prescribed by real estate law is to deliver property disclosures in a timely fashion which is always before the seller’s acceptance. If disclosure is delayed beyond acceptance, provisions 14a and 14b satisfy the statutorily mandated additional remedy, provided by a contingency, giving the buyer the right to cancel as one of his many remedies.

All property-related disclosures are to be delivered to the buyer as soon as practicable – meaning as soon as possible (ASAP) – after commencement of negotiations and before entering into a binding contract. [Calif. Civil Code §§2079 et seq.; Calif. Attorney General Opinion 01-406 (August 24, 2001)]

As a matter of professional practice, buyers should receive all property disclosures from the listing agent prior to determining a property’s value for submitting an offer to purchase since these disclosures contain material facts which will factor into any prudent buyer’s pricing of the property. Thus, if the buyer is not in a position to review and consider the contents of the mandated seller and listing agent disclosures before submitting an offer, he is essentially submitting the offer blind – without the aid of pertinent information contained in the disclosures which reveal the precise condition of the property, and hence its value. If that is the practice of the listing broker, only then does the 7 and 17 day contingency provision in the trade union’s form for delayed disclosures kick in – as required by statute.

This asymmetry of information between the seller and the buyer of a deliberately delayed disclosure is bad for the listing broker, buyer and seller. The delay triggers the contingency, as well as provide grounds for claims of misrepresentation of property conditions at the time of contracting to buy. For example, if the buyer were to submit an offer then later receive a disclosure containing material facts which adversely affect the value of the property, he has the right to either:

  • cancel the purchase agreement; or
  • enforce his expectations based on the disclosures he received (or knew about) at the time of the offer was submitted.

When a buyer receives the property disclosures (including a Home Inspection Report (HIR) on anyone’s request) after submitting his offer, and if the disclosures notify him of facts which have an adverse impact on the property’s value (meaning costs will be incurred to correct the deficiencies), the buyer and his selling agent may then make a demand on the seller to cure the defects undisclosed at the time the acceptance occurred by completing the property inspection and handing it to the seller or the seller’s listing agent a Buyer’s Request for Repairs. Thus, the buyer can waive his right to cancel and rely on the disclosures existing at the time of contracting. [See first tuesday Form 269]

The buyer’s request for repairs is essentially a checklist, and is usually based on all the property defects set forth in the delayed receipt of an HIR report, calling for the seller to repair, replace or correct the defects unknown to the buyer at the time of acceptance, and do so prior to closing the transaction and delivering possession to Buyer – as an alternative remedy to the cancellation under those paragraphs 14a and 14b.

first tuesday’s policy stance for gatekeeper (brokers and agents) conduct is different regarding the proper handling of disclosures. Real estate law does not allow a “buyer beware” treatment. The trade union’s form seems to place an emphasis on giving the mandatory disclosures to the buyer after he has submitted the purchase offer and after acceptance, not on the commencement of negotiations as required – which of course is before an acceptance of a purchase agreement offer by a seller has taken place. [See first tuesday Form 150]