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June 2018 C.A.R. Forms Release

by | Jun 29, 2018 | Contracts and Forms

NEW C.A.R. FORMS: 

  1. Buyers’ Homeowners’ Association Advisory (BHAA):  This new form advises Buyers of property subject to a HOA of the importance of a thorough review of HOA documents which will govern, affect and, in some cases, may limit their current and future use of the property.

BROKER RISK MANAGEMENT FORM:  Broker Risk Management (BRM) had previously created a comparable form.  This new C.A.R. Advisory is an acceptable substitute for Brokers who had previously implemented use of the BRM form.

RECOMMENDATIONS: This Advisory should be given to all Buyers just before or at the time they receive the HOA documents for review.

Only Buyers sign this Advisory.  Sellers do not sign this form and there is no need to provide a copy to the Seller or Listing Broker.

  1. Disclosure Information Advisory (DIA): This new form advises Sellers of the importance of disclosing what they know that affects the value and desirability of the Property.  The form emphasizes that Sellers must take the time to be thorough and review their documents before making required statutory and contractual disclosures.

BROKER RISK MANAGEMENT FORM:  BRM had created a similar form. See the BRM form “Seller Advisory Regarding Completing the Real Estate Transfer Disclosure Statement and Other Seller Disclosure Forms” which follows at the end of this Tip.

While this new C.A.R. form is similar in many ways, it does lack several features, the most important of which is the paragraph regarding Question 16 under paragraph II.C of the TDS.  In addition, for those sales professionals using forms other than C.A.R. (i.e., SFAR and PRDS), the BRM form included at the end of this Tip references, “Supplements to the TDS,” which would include the SFSD (SFAR) and the SCC (PRDS), rather than just the Seller Property Questionnaire (SPQ).

While both forms are quite similar and useful, it is the recommendation of BRM that Brokers use the attached BRM form for this purpose.

RECOMMENDATIONS: Either the C.A.R. form DIA, or the attached BRM Advisory, should be given by all Listing Sales Professionals to Sellers prior to the Sellers completing the disclosure documents.  It is a good idea to go through this Advisory with Sellers so that they have a full and clear understanding of their legally-required disclosure obligations.  Pay particular attention to the section entitled “Preparing to Complete Your Disclosure Obligations, advising Sellers to gather all documents in their possession which may be essential in providing responsive disclosures.

Only Sellers sign this form and a copy goes into the broker file.  No copy should be sent to the Selling Broker or the Buyer.

 

  1. Tenant Flood Hazard Disclosure (TFHD): In every residential lease or rental agreement entered into on or after July 1, 2018, the Landlord or Landlord’s Agent must disclose whether the Property is in a flood hazard area of potential flooding, including the Landlord’s “actual knowledge.”

REVISED C.A.R. FORMS FOR LISTINGS & SALES: 

Note:  In all revised forms below: (a) the prior revision of the form is acceptable for use unless otherwise noted; and (b) all references to BRE are changed to DRE.

  1. Cancellation of Listing (COL):  Revised to give Broker additional options for compensation rights when agreeing to cancel any type of Listing Agreement.
  2. Residential Lease after Sale (RLAS):  Use of Prior Revision is NOT OKAY.

Adds language making tenant responsible for burned-out light bulbs; adds required flood hazard disclosure reference; substantially reorganizes statutory disclosures into Paragraph 22; and expands Tenant insurance requirements in paragraph 27.

  1. Statewide Buyer and Seller Advisory (SBSA):  This Advisory has been extensively reorganized in an attempt to present the information in a more orderly and cohesive format.  To make it easier to find specific issues, a Table of Contents with new topic sub-headings was added. The rights and duties of the Buyer, Seller and Broker on page 1 have been expanded.

Adds new paragraphs:

Section B:  1. Accessory Dwelling Units; 3. Buyer Intended Future Use of, and Modifications to, the Property; 14. Short Term Rentals and Restrictions.

Section F:  9.  Recording Devices.

Adds significant new language to the following paragraphs:

Section A:  2. Environmental Hazards; 10. Square Footage, Lot Size, Boundaries and Surveys;

Section B:  10. Marijuana, Cannabis, and Methamphetamine Labs; 16. Swimming Pool, Security and Safety.

Section F:  5.  Marketing, Internet Advertising; Internet Blogs; Social Media; 7. Re-Keying; 8. Solar Panel Leases.

Section G:  1. Local Advisories or Disclosures. (Recognized the increased use of local advisories.)

  1. Seller Property Questionnaire (SPQ): Two significant changes.  First, C.A.R. has revised the inquiry about compliance with the Lead-Based Paint Renovation Rule for work on pre-1978 Property (Section V-B).

COMMENT:  While question V.B.5 is intended to elicit information from Sellers regarding renovations or alterations, the questions are awkward and confusing.  For example, question B.5 first asks: “Whether the Property was built before 1978” and provides a Yes or No option.  Note that the prompt for the question at the heading of that section is “Are You (Seller) Aware of. . ..”; so, the question is asking about Seller’s awareness as to when the property was built.

More troubling:   the next two questions ask whether the Seller is aware of whether any renovations of “lead-based paint surfaces started or completed,” and, if so: “Were such renovations done in compliance with the Environmental Protection Agency Lead-Based Paint Renovation Rule?”

Unfortunately, neither the SPQ nor the SBSA provides any guidance as to precisely what is required under the EPA rules.  Unless the Seller has a written certification from an appropriately licensed and qualified painter or contractor that the lead-based paint was removed in compliance with the EPA standards, Sellers are probably not going to be “aware” of whether the work was done properly.

RECOMMENDATIONS:  If Sellers are not aware whether the answers to either of those two questions are within their knowledge or awareness, Sellers may want to answer “No” to those questions and, in the Explanation portion of that section, explain that they are not aware whether those statements are true.

 The second change is in Question M-1 regarding past and existing reports.  The question was expanded to clarify that the Seller is being asked about any documents regarding the Property, regardless of whether the Seller ever received that documentation.  The form was slightly reformatted to emphasize what the Seller have always been told: provide the documents in Seller’s possession to Buyer.

RECOMMENDATIONS:  Regardless of who an agent represents, it is important to read all of the Seller’s responses in the SPQ but in particular whether every “Yes” answer has an explanation, and the response to whether or not there are any other known documents.  The best practice is for Listing and Selling Agents to document their efforts to get the Seller’s documents delivered to the Buyers in a timely fashion.

 REVISED FORMS FOR RENTAL PROPERTY:

 Note:  In all revised forms below: (a) the prior revision of the form is acceptable for use unless otherwise noted; and (b) all references to BRE are changed to DRE.

  1. Lease/Rental Commission Agreement (LCA):  Revised so that Tenants as well as Landlords can agree to pay a commission.
  2. Lease Listing Agreement (LL):  Adds language disclosing Broker’s policy regarding cooperation.  Adds sentence in paragraph 7 that, if the listing is to be excluded from the MLS, the MLS rules may require an exclusion form.
  3. Residential Lease or Month-to-Month Rental Agreement (LR):  Use of Prior Revision is NOT OKAY.

Adds language making Tenant responsible for burned-out light bulbs; adds required flood hazard disclosure reference; and substantially reorganizes statutory disclosures into Paragraph 38.

  1. Application to Rent/Screening Fee (LRA):  Use of Prior Revision is NOT OKAY.

Paragraph 3G distinguishes companion animals from pets. Adds that, after a credit review, Landlord may inquire about the nature and length of time from a prior felony and provides that Tenant may provide screening information directly to an authorized screening service.

For more information on use of criminal records in Tenant screening, see Weekly Practice Tip:

“Use of Criminal Records in Tenant Selection.”

WEEKLY PRACTICE TIP: DO NOT FORWARD TO CLIENTS.  This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents.  It may not be reproduced or distributed without the express written consent of Broker Risk Management.  The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
© Copyright Broker Risk Management 2018                                                                        06/30/18

 

 

FORM FOLLOWS BELOW:

SELLER ADVISORY REGARDING COMPLETING

THE REAL ESTATE TRANSFER DISCLOSURE STATEMENT

AND OTHER SELLER DISCLOSURE FORMS

 

Property Address: __________________________________________________________________________

All Sellers in California have an affirmative duty to disclose to Buyers all material conditions, defects and/or issues known to them that might impact the value or desirability of the Property.  Failure to do so may lead to a claim or a lawsuit against you which can be very costly and time consuming.

As a Seller, you may be required to fill out one or more of the following Disclosure Forms:  1. Real Estate Transfer Disclosure Statement (“TDS”); 2. Seller Property Questionnaire (“SPQ”); 3. PRDS Seller Supplemental Checklist (“SSC”); 4. San Francisco Seller Disclosure; and/or 5. an Exempt Seller Disclosure (“ESD”).

You should follow the general suggestions below when filling out any or all Disclosure Forms.

PREPARING TO COMPLETE YOUR DISCLOSURE OBLIGATIONS:

  1. Read and carefully review all questions in the Disclosure Form(s) to make sure that you understand the full extent of the information that is being requested in each question.
  2. Locate any prior Disclosure Forms, reports, studies, repair estimates, plans, appraisals, invoices, photographs, or other documentation that includes information, of any age or date, that may be responsive to any of the questions or otherwise relate to the Property.  This documentation may include what you have created for your records or posted online (on any form of social media, including blogs, personal websites, Facebook, etc.) or received as a member of an HOA or as a Board member of an HOA.
  3. Use your existing documentation to refresh your memory of past and current issues, condition and/or problems and then provide a copy of that paperwork with your fully completed Disclosure Forms.
  4. Walk all the way around the inside and outside of the Property with the Disclosure Forms in hand to better remember issues, conditions, problems, defects, repairs or other concerns.
  5. Allow plenty of time to fully complete the Disclosure Forms.
  6. Your knowledge may be based upon what you have been told orally (e.g., in a conversation with a neighbor) or received in writing (such as a repair estimate, report, invoice, an appraisal, or sources as informal as neighborhood or HOA newsletters).

 

COMPLETING ALL DISCLOSURE FORMS:

 

  1. Do not leave any questions blank or unanswered; answer all questions and provide all documents, information and explanations to every “Yes” response in the blank lines or add an Addendum to the Disclosure Form.
  2. If you do not know the answer to any question, then you are “not aware” and should answer that question “No”.
  3. The Disclosure Forms are designed to get Sellers to provide Buyers with as much information as possible, and thus many of the questions on these forms may list multiple issues, conditions or problems and/or have subparts.  It is important to address each aspect of each question and provide precise details so that Buyers will understand the “who, what, where, when and how”.
  4. The Disclosure Forms are written using very broad language.  You should not limit the information, documents, and/or explanations that you provide Buyers.
  5. Be specific and provide facts for each response; you should not let subjective beliefs limit, qualify or downplay your disclosures.  Avoid words such as “never,” “minor,” “insignificant,” “small” or “infrequent;” these terms may reflect your opinion but that opinion may not be shared by Buyers, professionals or others.
  6. Consider all issues, conditions or problems that impact your Property even those that are not necessarily on your Property but are related to a neighbor’s property (such as shared fences, lot-line debates) or exist in the neighborhood (such as noise, smells or other nuisances).
  7. Even if you have learned to live with an issue, condition or problem, disclose it.
  8. Even if you believe that an issue, condition or problem has been repaired, resolved or stopped, disclose it but do not speculate, predict or guarantee the quality or effectiveness of the repair or resolution.
  9. If there is conflicting information, data, and/or documents regarding any issue, condition or problem, disclose and identify everything.
  10. Do not assume that you know the answer to all questions; for example, unless you personally obtained or received copies of permits, do not assume that anyone who did work on the Property obtained permits.
  11. If you are relying on written or oral information you received from someone else, even if you disagree with that information or unsure as to its truth, disclose and identify the source of that information.

 

COMPLETING SPECIFIC TYPES OF DISCLOSURE DOCUMENTS:

 

REAL ESTATE TRANSFER DISCLOSURE STATEMENT (“TDS”)

Section I allows Sellers to incorporate and provide reports and disclosures that relate to the information requested in that Disclosure Form.  Providing those “Substituted Disclosures” does not eliminate your responsibility to fully and completely disclose all known information that is requested in the TDS.

Section II A asks you to check a series of boxes to indicate what appliances, fixtures and other items exist on the Property and asks whether any of those existing items are “not in operating condition,” a term which is not defined.  Consider whether the checked appliances, fixtures and items fully function as if they were new and, if not, disclose any issues, limitations or problems.  The TDS is not a contract and it does not control what items must remain with the Property after close of escrow; the Purchase Agreement determines what items must remain.

Section II B asks if you are aware of any significant defects/malfunctions in certain identified areas of the Property. There is no definition for “significant defects/malfunctions”; do not assume this terminology places any limits on what you need to disclose.  If you check any of the boxes, please provide as much information as possible regarding the issues, conditions or problems that you know about the checked areas.

Section II C asks sixteen questions regarding the Property and surrounding areas.  These questions are written very broadly and contain multiple issues, conditions and/or problems.  Make sure that you respond as to each issue, condition or problem. If you respond “Yes” to any question, please provide as much information as possible.

If you are answering any of these questions “No” because you lack familiarity with the Property or the topic of any question, then you should fully explain the reasons, such as you have not seen the Property in a long time or at all.  Buyers need to understand that your “No” answer reflects the lack of awareness of the item, not that you are representing that the problem, condition or issue does not exist. 

Question 16 in Section II C asks about certain legal issues, conditions or problems.  First, it asks you to disclose any lawsuits by you or against you threatening to, or affecting, the Property.  Next, it asks about matters related to construction defects and references Civil Code Sections 900, 903, 910 and 914.  These code sections are part of a law that is widely known as SB 800 or Title 7 and which generally applies to residential real property built by a “Builder” (as defined in Section 911) and sold for the first time on or after January 1, 2003.  Section 900 of that law provides for a limited one-year warranty from the Builder.  Section 903 refers to an “enhanced protection agreement” if such is provided by the Builder.  Sections 910 and 914 reference prelitigation procedures and remedies in the event of a claim against the Builder.

 

SUPPLEMENTS TO THE TDS

 The TDS does not include questions regarding everything that Sellers need to disclose to Buyers, such as whether there has been a death on the Property within the last 3 years.  Another example of a legally-required disclosure that is not in the TDS became effective January 1, 2017:  Sellers of single-family residences built prior to January 1, 1994 must disclose if the Property has any noncompliant plumbing fixtures which means:  (1) any toilet using more than 1.6 GPF; (2) any showerhead that has a flow capacity of more than 2.5 GPM, and (3) any interior faucet that emits more than 2.2 GPM.

Because of the limitations in the TDS, the California Association of REALTORS® created a statewide Supplement to the TDS called the SPQ.  PRDS, another REALTOR® organization, created a detailed Supplement to the TDS called the SSC that is designed for use in San Mateo and Santa Clara Counties.  In San Francisco, the local Association of REALTORS® created a San Francisco Seller Disclosure for use in that city.  These Supplemental Disclosure Forms enable Sellers to fulfil their obligation to disclose all known material facts regarding the Property and/or the neighborhood that are not asked about in the TDS. Sellers completing a TDS should fully complete either the SSC or the SPQ.

 

EXEMPT SELLER DISCLOSURE FORMS

 

Some Sellers of real property may be legally exempt from competing the TDS.  For example, Probate and Bankruptcy Court sales and sales by governmental entities are exempt from the obligation to provide a TDS.  Some property that is owned by a Trust which has Trustee(s) acting in the capacity of a Seller may also be exempt but not all Trustee(s) are exempt.  If a qualified California real estate attorney has advised you that you are exempt from completing the TDS, then you are not obligated to complete that form or any Supplement to the TDS.

However, being exempt from completing certain Disclosure Forms does not completely eliminate those disclosure obligations that apply to all Sellers under federal, state or local laws, ordinances or regulations and/or by contractual agreement with the Buyer.  Therefore, both CAR and PRDS have created Exempt Seller Disclosure Forms to aid exempt Sellers in meeting their disclosure obligations. Pay particular attention to the “catch-all” question in each Exempt Seller form (Question 4.J in the CAR form. Question 2 in the PRDS form) which asks you to disclose your awareness of any other material facts or defects affecting the property.  These “catch-all” questions are designed to prompt you to fully comply with your disclosure obligations.

 

FINAL RECOMENDATIONS:

 

It is important that you fully complete the TDS and/or any other Disclosure Forms as honestly as you can.  To that end, your Listing Agent strongly recommends that you consider the following points when completing your Disclosure Forms:

  • If you are aware of any planned or possible changes to your neighbor’s property (such as an addition), changes in the neighborhood (such as new construction or road changes) that may affect traffic, views, noise levels or other issues, conditions or problems, disclose those plans or changes even if you are not certain whether the change(s) will ever occur.
  • Disclose any lawsuits, whether filed in the past, are presently filed, or that will be filed, regarding the Property or the neighborhood (such as an HOA dispute) even if you believe that the case has been resolved.  Provide as much detail as possible about any lawsuit, including the name of the case and the County where the case was filed.