Understanding the CAR Residential Contracts Series Part 7
By: D. Keith Dunnagan,
BPE Law Group, PC
September 19, 2023
Thus far in this series on the CAR Forms we have completed our review of the Residential Purchase Agreement (“RPA) by examining contingencies and how they work, then reviewing liquidated damages and cancelling a contract, followed by collecting the earnest deposit and specific performance when parties breach and finally reviewing the contractual language related to closing an escrow. This is the process of navigating the RPA from a high level.
In Part 6 we began our look at disclosures and more importantly the TDS as required by the Civil Code § 1102 et seq. Today, examine the requirements of the Seller Property Questionnaire (“SPQ”). As recently as just a few years ago, the SPQ was not a required document. Section 11A of the RPA requires a Seller to provide the SPQ unless the Seller was exempted by law from having to provide a TDS.
Civil Code § 1102.2 identifies ten categories of sellers who are exempt from the TDS obligation. Those exempted from the TDS are limited to transfers related to a new subdivision or common interest development requiring a public report §1102.2(a); transfers pursuant to court order §1102.2(b); foreclosure transfers or transfers from a lender to another when the lender acquired the property through foreclosure §1102.2(c); estate transfers unless the seller is a natural person and was the owner of the property §1102.2(d)(ie. owner transfers property into revocable trust, is the trustee of the trust and then elects to sell the property through the trust – seller still has to disclose and provide a TDS); transfers between co-owners §1102.2(e); transfers between spouses or parent to child transfers §1102.2(f); transfers resulting from a marital dissolution §1102.2(g); transfers by the state Controller under the unclaimed property laws §1102.2(h); transfers made pursuant to property tax foreclosures §1102.2(i); and transfers between governmental entities §1102.2(j). Any transferor not identified above is required to provide a TDS and by virtue of that requirement, pursuant to the RPA is then obligated to provide a completed SPQ.
The SPQ is a more detailed disclosure requiring the seller to specifically answer questions related to multiple portions of the property. It requires the seller to identify among other things repairs and alterations, structural problems, water issues and neighborhood problems just to name a few. The purpose of this disclosure is to provide the buyer with a more comprehensive look at the condition of the property, especially those items which are hidden from the buyer. The is law is clear that the seller has the duty to disclose all known material defects of the property and the SPQ is the comprehensive document that provides the information in the control of the seller.
The SPQ requires the seller to carefully consider and answer the questions thoroughly. The seller should take the time to review the questions and provide the information sought. Many sellers try to complete this task once in contract. However, given the nature of the document, it is probably better for a seller to sit with their agent and complete this document prior to listing the property to be certain they have a fully completed document.
Sometimes the answers to the questions are almost impossible to complete. Take for example the section on repairs. The question requires the disclosure of any repair or alteration or modification of a property. While it may be a somewhat easy question to answer for someone who has lived in a property for say 5 years. What about the person who has lived in their property for 25 years? There is functionally no way to remember everything that has been done. The law requires to disclose what is known and should include significant repairs, modifications or alterations. However, the law does not require perfect exactness. Under 1102.4 and 1102.5 of the Civil Code, generally information not within the personal knowledge or rendered inaccurate because of negligence will not create liability. The code is looking for and creating liability related to acts of fraud. Further, the purpose is to give the buyer enough information to complete their own due diligence, which is an obligation of the buyer.
In the next installment of this series we will look at the agent’s disclosure requirement in the AVID. If you or someone you know is having an issue related to incorrect disclosure they need to seek the advice of competent counsel. The law related to non-disclosure is complicated and tricky to navigate and the attorneys at BPE Law Group have significant experience in advising and representing clients in these matters and would welcome the opportunity to assist you in your disclosure matter.
The information presented in this article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your state immediately so that you can determine your best options.
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• February 14, 2023 – Understanding Mediation and Arbitration in RPA
• April 4, 2023 – Understanding Liquidated Damages in a Home Purchase Contract
• June 20, 2023 – Understanding the Lis Pendens
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By: D. Keith Dunnagan,
BPE Law Group, PC
September 19, 2023
Thus far in this series on the CAR Forms we have completed our review of the Residential Purchase Agreement (“RPA) by examining contingencies and how they work, then reviewing liquidated damages and cancelling a contract, followed by collecting the earnest deposit and specific performance when parties breach and finally reviewing the contractual language related to closing an escrow. This is the process of navigating the RPA from a high level.
In Part 6 we began our look at disclosures and more importantly the TDS as required by the Civil Code § 1102 et seq. Today, examine the requirements of the Seller Property Questionnaire (“SPQ”). As recently as just a few years ago, the SPQ was not a required document. Section 11A of the RPA requires a Seller to provide the SPQ unless the Seller was exempted by law from having to provide a TDS.
Civil Code § 1102.2 identifies ten categories of sellers who are exempt from the TDS obligation. Those exempted from the TDS are limited to transfers related to a new subdivision or common interest development requiring a public report §1102.2(a); transfers pursuant to court order §1102.2(b); foreclosure transfers or transfers from a lender to another when the lender acquired the property through foreclosure §1102.2(c); estate transfers unless the seller is a natural person and was the owner of the property §1102.2(d)(ie. owner transfers property into revocable trust, is the trustee of the trust and then elects to sell the property through the trust – seller still has to disclose and provide a TDS); transfers between co-owners §1102.2(e); transfers between spouses or parent to child transfers §1102.2(f); transfers resulting from a marital dissolution §1102.2(g); transfers by the state Controller under the unclaimed property laws §1102.2(h); transfers made pursuant to property tax foreclosures §1102.2(i); and transfers between governmental entities §1102.2(j). Any transferor not identified above is required to provide a TDS and by virtue of that requirement, pursuant to the RPA is then obligated to provide a completed SPQ.
The SPQ is a more detailed disclosure requiring the seller to specifically answer questions related to multiple portions of the property. It requires the seller to identify among other things repairs and alterations, structural problems, water issues and neighborhood problems just to name a few. The purpose of this disclosure is to provide the buyer with a more comprehensive look at the condition of the property, especially those items which are hidden from the buyer. The is law is clear that the seller has the duty to disclose all known material defects of the property and the SPQ is the comprehensive document that provides the information in the control of the seller.
The SPQ requires the seller to carefully consider and answer the questions thoroughly. The seller should take the time to review the questions and provide the information sought. Many sellers try to complete this task once in contract. However, given the nature of the document, it is probably better for a seller to sit with their agent and complete this document prior to listing the property to be certain they have a fully completed document.
Sometimes the answers to the questions are almost impossible to complete. Take for example the section on repairs. The question requires the disclosure of any repair or alteration or modification of a property. While it may be a somewhat easy question to answer for someone who has lived in a property for say 5 years. What about the person who has lived in their property for 25 years? There is functionally no way to remember everything that has been done. The law requires to disclose what is known and should include significant repairs, modifications or alterations. However, the law does not require perfect exactness. Under 1102.4 and 1102.5 of the Civil Code, generally information not within the personal knowledge or rendered inaccurate because of negligence will not create liability. The code is looking for and creating liability related to acts of fraud. Further, the purpose is to give the buyer enough information to complete their own due diligence, which is an obligation of the buyer.
In the next installment of this series we will look at the agent’s disclosure requirement in the AVID. If you or someone you know is having an issue related to incorrect disclosure they need to seek the advice of competent counsel. The law related to non-disclosure is complicated and tricky to navigate and the attorneys at BPE Law Group have significant experience in advising and representing clients in these matters and would welcome the opportunity to assist you in your disclosure matter.
The information presented in this article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your state immediately so that you can determine your best options.
Recent and Popular Articles From Our Blog:
• May 10, 2022 – Using the 1031 to Reinvest
• August 23, 2022 – Understanding Private Road Maintenance
• January 10, 2023 – Website Accessibility Requirements
• February 14, 2023 – Understanding Mediation and Arbitration in RPA
• April 4, 2023 – Understanding Liquidated Damages in a Home Purchase Contract
• June 20, 2023 – Understanding the Lis Pendens
• June 27, 2023 – Do’s and Don’ts Guidelines to a Dental Practice Transition