Q: For residential sales, I am aware of the 4-Part Combined Hazards booklet (covering Environmental Hazards, Lead-Based Paint, Earthquake Safety and Home Energy Rating System). However, I am confused as to when it is actually required, and in what situations it should be given, even if not required.
A: While the “Combined Hazards” booklet seems easy to use, you must be aware of how each of the four booklets within that 4-Part Combined Hazards booklet must be used.
MANDATORY DISCLOSURES (SOMETIMES)
I. LEAD-BASED PAINT – Federal law requires that on the sale or lease of allresidential property built before Jan. 1, 1978, except as indicated below, the seller/lessor must;
- Provide the buyer/lessee with a lead hazard information pamphlet;
- 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, has received the pamphlet, and has a 10-day opportunity to inspect before becoming obligated under the contract.
This law also applies to manufactured homes and personal property mobile homes.
Exemptions:
- Foreclosure or trustee’s sale transfer pursuant to a deed of trust (REO properties and deed-in-lieu of foreclosure are NOT exempt!)
- Zero-bedroom dwelling (loft, efficiency unit, dorm, or studio)
- Short-term rental (defined in this law as 100 or fewer days)
- Housing for elderly or handicapped (unless children live there)
- Rental housing certified free of lead paint
The buyer (but not a lessee) is permitted a 10-day period to conduct an inspection unless the parties mutually agree upon a different time period.
PRACTICE TIPS:
- On all sale and rental transactions covered by this law, the agent representing the seller/lessor must ensure compliance with the requirements of this law.
- The Combined Hazardsbooklet and the CAR pamphlet, Protect Your Family from Lead in Your Home, satisfy these disclosure requirements (except for sales of HUD properties, then specific HUD forms are required).
- If the property being sold/leased/rented is covered by the Lead-Based Paint law, the buyer MUST be given a 10-day period (unless a different time is mutually agreed upon) to investigate for the presence of lead-based paint and to cancel if the buyer so desires. This contingency may be waivable and/or included in a general investigation contingency.
NOTE: All standard Purchase Agreements provide for a contingency for buyer to investigate for lead and to cancel.
II. HOMEOWNER’S GUIDE TO EARTHQUAKE SAFETY –
MANDATORY DELIVERY: The seller’s agent must give the seller the booklet, The Homeowner’s Guide to Earthquake Safety, and the seller must give this booklet to the buyer for the following types of properties:
- Transfer of residential real property of 1-4 units, manufactured homes, and mobile homes, of conventional light frame construction, and built prior to Jan. 1, 1960, if not exempt (comparable exemptions as for the Transfer Disclosure Statement).
- Additional exemption if the buyer agrees, in writing, to demolish the property within one year from date of transfer.
Known structural deficiencies must be disclosed by the seller to the buyer and the form in the booklet entitled Residential Earthquake Hazards Report meets this disclosure obligation. Sellers need to answer all questions and sign the form.
VOLUNTARY DELIVERY: Transfer of any real property.
BENEFIT OF VOLUNTARY DELIVERY: If the Guide is delivered to the buyer, then the seller and broker/agent are not required to provide additional information concerning general earthquake hazards. More importantly, the seller and broker/agent have no liability for unknown earthquake safety issues detailed in the Guide.
OPTIONAL DISCLOSURES
III. RESIDENTIAL ENVIRONMENTAL HAZARDS BOOKLET
OPTIONAL DISCLOSURE – but highly recommended. The CAR Combined Hazards booklet may be used. Use on transfer or exchange of all real property. Also applies to manufactured homes and personal property mobile homes.
BENEFIT OF VOLUNTARY DELIVERY: If a consumer information booklet is delivered to the buyer, then the seller and broker/agent are not required to provide additional information concerning common environmental hazards, including, but not limited to, mold. More importantly, the seller and broker/agent have no liability for unknown earthquake safety issues detailed in the Guide.
IV. HOME ENERGY RATING SYSTEM (HERS)
Optional Disclosure – For use on transfer or exchange of all real property. Also applies to manufactured homes and personal property mobile homes.
BENEFIT OF VOLUNTARY DELIVERY: If an energy ratings booklet is delivered to the buyer, then a seller or broker is not required to provide additional information concerning the existence of a statewide energy rating program.
PRACTICE TIPS
- Because the Combined Hazards booklet is required on some sale transactions and because there are significant benefits to the seller and broker/agent if the booklet is delivered to the buyer, it is best to always make sure, regardless of who you represent, that you have documentation in every broker file that this booklet was actually delivered to the buyer (and not just that an access link was provided).
- In all transfers of all types of properties, known hazards of all types must be disclosed to the buyer, in writing.
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 2019 08/16/19