BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
Public Records
Q: I am a buyer’s agent. The seller disclosed in the TDS that he was unaware whether the room added on the rear of the home was built with permits. Seller stated that he had hired a contractor and he “thought” that permits were pulled, but wasn’t sure.
Buyer now wants me to go to City Hall and check on the status of the permits. Is that something I should be doing?
A: A very good question that comes up all the time, and is important since there are an increasing number of claims based on failure to disclose public records.
As we know, zoning laws, easements of record, permit requirements, abatements, building codes, liens, attachments and other recorded documents may very well impact a buyer’s future use, enjoyment and value of the property.
BACKGROUND: Civil Code Section 2079 sets forth an agent’s duty to conduct a “reasonably competent and diligent visual inspection of the property” and disclose to the buyer “all facts materially affecting the value or desirability of the property” revealed by the inspection.
Section 2079 further states that the inspection to be performed by the agent does not include inaccessible areas, areas off the site of the subject property or “public records or permits concerning title or use of the property.”
That does not mean, however, that public records can be ignored by sellers, buyers or the agents. For example, if sellers or agents have actual knowledge of the presence or absence of public records or permits which could affect the value or desirability of the property, they must fully disclose what they know.
And, there are certain things that buyers’ agents and listing agents should do, and not do, when it comes to public records
PRACTICE TIPS:
BUYERS’ AGENTS:
1. Discuss with your buyers the importance of public records. Tell them to review the various disclosure documents for issues related to public records.
2. Tell buyers to pay attention to the Preliminary Title Report. Check who is on title. Tell your buyers to review all easements, liens and other matters of record as these may have a significant effect on the title and use of the property.
See Weekly Practice Tip “Preliminary Title Reports”
3. However, it is not a good idea for a buyer’s agent to go unaccompanied to check public records. Remember, this is not your statutory duty. What if you miss a recorded document? In some counties, records are not easy to track. If you are checking for just one type of document, are you sure that your buyer isn’t expecting you to look at EVERYTHING?
4. Tell your buyers if they want to investigate any public records, they should bring that fact to your attention. You may want to direct your buyers to the appropriate public records department to investigate; or you may want to go with them. Let them ask the questions of the person behind the counter. Be helpful. But do not conduct the investigation on your own.
5. If your buyers raise a question regarding public records, pay attention. Follow up to help them get the answers. Keep notes in your transaction log. Document the delivery of documents to the buyer.
For documenting delivery of documents, see Weekly Practice Tip:
“Change Your E-mail Signature Block to Protect Yourself”
6. Agents do not have a duty to explain the effect of public records or permits. However, to help your buyers gain an understanding of the public records, direct the buyers to appropriate professionals, if necessary. Public employees in the relevant departments may be helpful. In some cases, it may take an attorney’s opinion to understand the effect of a recorded or filed public record.
7. If your buyers are out of town, discuss with your manager the best way to handle the situation.
LISTING AGENTS:
8. When taking a listing and discussing the TDS with your seller, emphasize the importance of public records. Remind seller of the duty of full disclosure. Sellers should deliver to buyer any public records information in their possession. Document the delivery of these records to buyer’s agent.
9. All of the above recommendations apply to listing agents if a seller asks you to check public records for any purpose.
This Weekly Practice Tip is 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.