QUESTION: I just took a listing and pulled up the Seller disclosure forms online. The CAR TDS looks different. Its revision date is 12/19 but I have taken several listings before the COVID-19 quarantine and those forms are all dated 4/14. Did I miss something? Why was the TDS changed and do we now need to use this different TDS?
ANSWER: CAR recently made what they call a “silent revision” to the Real Estate Transfer Disclosure Statement (“TDS”); that means that they made the revision to their online forms but made no announcement about it. The change was made during the hectic days of the statewide Shelter in Place Order. For some unknown reason, the form was incorrectly back-dated to December 2019 but it was definitely not issued as part of CAR’s December 2019 Forms Release nor was it introduced at the CAR Meetings in Anaheim in early February 2020.
BACKGROUND: Since its inception last century, the first part of the TDS, Section I Coordination with Other Disclosure Forms allows the Seller to designate other documents that can be used as “Substituted Disclosures” to the Seller’s answers in the TDS as long as those inspection reports or disclosures contain the same subject matter as what the Seller is asked to disclose in the TDS.
As the Legislature added more required Seller disclosures to Sections II-A and II-C of the form, Section I remained essentially the same except that a reference to the Natural Hazard Disclosure Report/Statement (“NHDS”) was added. For this last decade, Section I of the TDS has looked like this:
Sellers were not required to use the Substituted Disclosure mechanism; thus, in many transactions, Sellers chose not to check either of the boxes. Nonetheless, Sellers’ TDS forms without any checkboxes or information in Section I were still deemed fully completed because the Sellers were not designating any Substituted Disclosures.
2019 LEGISLATIVE CHANGE: As part of CAR’s clean-up legislation regarding Agency issues, the California Legislature was asked to add to the statute that regulates the TDS (Civil Code Section 1102 et seq.) a definition of what constitutes a fully-completed TDS for purposes of starting a Buyer’s rescission/cancellation right. Unfortunately, the definition that was adopted specifies that a Seller must complete both Sections I and II.
The TDS form, which appears in that statute, was changed so that Section I of the TDS now has 3 Checkbox options and the third box states: “No substituted disclosures for this transfer.”
Section I of the TDS now looks like this:
TDS FORMS CHANGES: CAR has added this new checkbox to their TDS form. (PRDS has also changed its TDS form but with a revision date of 5/2020).
SELLER OPTIONS: The Seller now has four (4) options when responding as to whether or not there will be Substituted Disclosures:
□ Seller can check only Box #1 and only reports specified in the contract will be Substituted Disclosures;
□ Seller can check only Box #2 but Seller must identify what additional inspection reports or disclosures will
be considered Substituted Disclosures;
□ Seller can check both Box #1 and Box #2 as long as the information above is entered into the blank line; or
□ Seller can check only Box #3 so as to affirmatively state there are no Substituted Disclosures.
For all new listings and sales, the new TDS should be used and the Seller should be encouraged to make a choice in Section I as to whether or not they are designating any documents as Substituted Disclosures. Agents should check the Seller’s disclosures to make certain that the Seller has designated their choice in Section I and answered all questions in Section II (including providing explanations for each “Yes” answer), so that the Seller’s sections of TDS can be considered “fully completed.”
If you have a pending transaction that used an earlier version of the TDS and both boxes in Section I are blank, it is not necessary to re-do the TDS. Everyone should simply treat that transaction as though the Seller has chosen not to designate any documents as Substituted Disclosures.
BEST PRACTICES:
- Agents cannot fill in anything in Section I on the Zip platform. The boxes and the blank lines are “grayed out” as shown above which means the form has been pre-programmed to prevent the Agents from making the selection of which box to check and Agents cannot designate what documents are to serve as Substituted Disclosures.
- Sellers who complete their disclosure documents using GLIDE will be prompted to complete Section I before proceeding to Section II.
- Sellers’ Agents need to (a) read what the Sellers wrote in both Sections I and II to make sure that the form is fully completed, dated and signed by the Seller; and (b) properly complete Section III of the TDS (preferably by checking the first box and then attaching the AVID). Both of these steps need to be taken care of before that TDS is provided to anyone else.
- Buyers’ Agents should confirm that Sections I, II and III are fully completed before providing the TDS to the Buyer and promptly completing Section IV of the TDS (preferably by checking the first box and then attaching the AVID).
This Weekly Practice Tip an attorney-client privileged document 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 2020 05/01/2020