Form-of-the-week: Condition of Property — Transfer Disclosure Statement (TDS) – Form 304
Mandated on one-to-four residential units
A seller of a one-to-four unit residential property completes and delivers to a prospective buyer a statutory form called a Transfer Disclosure Statement (TDS), more generically called a Condition of Property Disclosure Statement. [Calif. Civil Code §§1102(a), 1102.3; see first tuesday Form 304]
The seller’s use of the TDS form is mandated. The seller is required to prepare it making all entries with honesty and in good faith, whether or not a seller’s agent is retained to review its content. [CC §1102.7]
Editor’s note – A “condition of property” form does not exist for use in California which covers other than one-to-four unit residential property. However, first tuesday is in the process of producing a standardized condition of property disclosure form for the sale of other types of properties including commercial property later this year.
When preparing the TDS, the seller sets forth any property defects known or suspected to exist by the seller.
Any conditions known to the seller which might negatively affect the value and desirability of the property for a prospective buyer are to be disclosed in the TDS by the seller, even though the defect may not be a boilerplate item listed on the form. Disclosures to the buyer are not limited to conditions preprinted for comment on the form. [CC §1102.8]
Also, the buyer cannot waive the seller’s delivery of the statutorily-mandated TDS, even when it is not handed to the buyer before entering into a purchase agreement for the property. Any attempted waiver, such as the use of an “as-is” clause in the purchase agreement or counteroffer, is void as against public policy. The words “as is” are never to be used in the context of a real estate transaction. “As is” implies a failure to disclose something adverse about the property known to the seller or the seller’s agent, a prohibited activity. [CC §1102.1(a)]
A property is always sold “as disclosed” in the TDS.