BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
How to “Deliver” the Combined Hazards Book Disclosures
Q: Many listing agents in my area do not deliver the Combined Hazards Book, or an electronic version, to the buyer, but merely deliver a link to an online site where the four separate booklets can be viewed. I am concerned if this is the right way to do this?
A: You are right to be concerned, because that practice does not meet the statutory requirement of “delivery” of those booklets from the seller to the buyer.
BACKGROUND:
There are four separate booklets in the “Combined Hazards Book.” Three of those are governed by California law, and the fourth, the Lead-Based Paint disclosure, is governed by federal law.
Here is a brief summary of those four disclosures:
1. Homeowners’ Guide to Earthquake Safety:
Unless exempt, this booklet is mandatory in the sale of residential 1-4 units, manufactured homes, and mobile homes, of conventional light-frame construction, which are built prior to January 1, 1960. The exemptions are almost the same as for the TDS. If this booklet is delivered to the buyer, then the seller or broker is not required to provide additional information concerning general earthquake hazards.
Also, be aware that for all properties for which this earthquake safety booklet is mandatory (i.e., non-exempt properties built before January 1, 1960), the seller must disclose known structural defects. The hard copy “Combined Hazards Book” contains the form for that disclosure on the inside back cover of most versions of this book. The seller must sign that disclosure report and the buyer should sign a receipt for that disclosure report. Note that in the hard copy Combined Hazards Book, this disclosure report is conveniently on the reverse side of the back cover receipt for the buyer to sig, evidencing the receipt of the entire Combined Hazards Book as well.
2. Residential Environmental Hazards:
Although delivery is optional, it is highly recommended to deliver this booklet to a buyer because then the seller or broker is not required to provide additional information concerning common environmental hazards.
3. Home Energy Rating System (“HERS”):
This is an optional disclosure. However, if the HERS booklet is delivered to the buyer, then a seller or broker is not required to provide additional information concerning the existence of a state-wide energy rating program.
4. Lead-Based Paint Disclosure:
Unless an exemption applies, this disclosure is required on the sale or lease of ALL residential properties built before Jan. 1, 1978, including manufactured homes and personal property mobile homes.
There are numerous exemptions including: (1) Foreclosure or trustee’s sale (Note, however, that REO properties and deed-in-lieu of foreclosure are NOT exempt!); (2) “zero-bedroom” dwellings such as a loft, efficiency unit, dorm, or studio; (3) short term rentals of 100 days or less; (4) housing for elderly or handicapped unless children live there; and (5) any rental housing that is certified to be free of lead paint.
See the CAR Legal Memo on this topic for more details at:
http://www.car.org/legal/disclosure-folder/fed-lead-based-paint-hazard/
When this law applies, sellers and lessors must provide buyers and lessees with a lead hazard booklet. In addition, federal law requires the seller to disclose the presence of any known lead-based paint, and provide a statement signed by the buyer that the buyer has read the warning statement and has received the pamphlet.
REQUIREMENT OF DELIVERY:
California Law provides that, whether mandatory or voluntary, DELIVERY of the Earthquake Safety, Environmental Hazards and HERS booklets provides a “safe harbor,” freeing the broker and seller from the obligation to provide additional information regarding the topics discussed in those booklets. But, sellers and agents with actual knowledge of these hazards must disclose.
The federal Lead-Based Paint disclosure is required for certain properties, and buyer must sign a statement that they have received the pamphlet.
PRACTICE TIPS:
1. Even when delivery of the booklets in the “Combined Hazards Book” is optional, it is wise to deliver the booklets to the buyer because of the “safe harbor” for sellers and brokers.
2. Listing agents should deliver these booklets to the buyer, through the buyer agent if there is one. However, if the listing agent fails to deliver the booklets, the buyer agent should deliver the booklets to the buyer to, at a minimum, protect the buyer’s broker by taking advantage of the “safe harbor” provisions.
3. Do not merely deliver to buyer links to those disclosure booklets as this is not adequate “delivery” to the buyer.
4. Either deliver the hard copy of the “Combined Hazards Book,” or deliver electronic copies of the actual, complete disclosure booklets to the buyer.
5. Be sure to obtain from the buyer a signed receipt for the booklets. See, e.g., the receipt on the back of the“Combined Hazards Book.” This could also be in the form of a document transmittal cover sheet signed by the buyer, and returned to the listing agent, stating that buyer has received the copies of the booklets.
6. IF YOU KNOW YOU MUST DISCLOSE: Remember, if the seller or agent is actually aware of any of the hazards identified in these booklets, the seller or agent must disclose that actual knowledge to the buyer. This can be done in the TDS or AVID or other means of disclosure if the transaction is exempt from using those disclosures.
7. MANDATORY SELLER DISCLOSURE: For the sale of residential 1-4 units, manufactured homes, and mobile homes, of conventional light-frame construction, which are built prior to January 1, 1960, unless an exemption applies (e.g., properties for which delivery of the Homeowners Guide to Earthquake Safety is mandatory; see above), the seller must disclose known structural defects on the form as set forth in the Combined Hazards Book. The buyer should sign a receipt and listing and selling broker should keep a copy in their files.
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 2013 02/15/13