by Brooks Schott and Art Macomber

October 27,2017

Overview.

This article discusses required disclosures by sellers of real estate in Washington State. With few exceptions, Washington State requires extensive seller disclosures before the sale of real property—whether the property is residential or commercial. The disclosure form required depends on whether the property is defined as commercial, “improved residential,”[i] or “unimproved residential.”[ii]

What must be disclosed

The seller disclosure form for commercial property must contain, at a minimum, the information listed in the Revised Code of Washington section 64.06.013. The commercial property form includes sections on title and legal issues, water, sewer, and building structural issues, heating, electrical, and other building systems, environmental questions, and the catchall category: “Other conditions or defects.”

The disclosure forms for unimproved residential property and improved residential property must contain the information listed in, respectively, the Revised Code of Washington sections 64.06.015 and 64.06.020. These two forms are like the commercial form, but they have additional sections for flood, soil stability, and homeowners’ association information. The improved residential and unimproved residential forms are different in that the improved residential form has two additional sections for (1) systems and fixtures, and (2) manufactured and mobile homes.

Each disclosure form requires sellers to state whether they have title to the property, and whether the title is subject to any adverse interests, such as a right of first refusal, an option, a lease, or a life estate.[vi] Encroachments, boundary agreements, and easements must also be disclosed.[vii] These forms also require disclosures related to water. For residential properties, sellers must disclose, among other items, the source of water, the existence of any easement(s) for access to or maintenance of the water source, and whether any repairs to the water system are needed.[viii]

For improved residential and commercial properties, the seller must make disclosures about any structural issues.[ix] This includes disclosure of whether the roof has leaked in the past five years.[x] It also includes disclosure of whether there have been any additions, conversions, or remodeling and, if so, whether all permits were obtained, and final inspections conducted. And the seller must disclose whether there are any defects with various parts of the structure, such as the foundations, the ceilings, or the walls.[xi]

Each of the required disclosure forms also has an “Environmental” section. This section requires disclosure of any flooding, standing water, or drainage problems on the property affecting the property itself or access to the property. The seller must also disclose any substances, materials, or products in or on the property that could be environmental concerns—such as asbestos, formaldehyde, radon gas, lead-based paint, fuel or chemical storage tanks, or contaminated soil or water. Disclosure of any soil or groundwater contamination is also required, as is disclosure of whether the property has ever been used as a dumping site.

Timing of Seller Disclosures and Buyer Responses.

Most people are familiar with the real estate phrase “time is of the essence.” The Washington State requirements allow responses in business days, but the number of days is short. The seller must deliver to the buyer a completed, signed, and dated real property transfer disclosure statement no later than five business days from the date of acceptance of the agreement for the purchase of the property.[xii] The buyer then has three business days from the date the seller delivers the disclosure statement to “approve and accept” or rescind the contract.[xiii] If prior to close of escrow the seller “learns from a source other than the buyer or others acting on the buyer’s behalf”[xiv] (like the buyer’s inspector) additional information that makes the previous disclosure inaccurate, the seller may either fix the defect and not tell the buyer, or tell the buyer and trigger a new rescission time period.[xv]

It is interesting given the remedies for nondisclosure discussed in the next paragraph, that a Washington seller is not required to disclose inaccuracies or defects in disclosure that they fix. We believe this puts the seller at risk to allow the “seller [to] take[ ] whatever corrective action is necessary so that the accuracy of the disclosure is restored, or the adverse change is corrected,”[xvi] because if not fixed completely or properly the buyer could come back later and sue the seller for nondisclosure. The seller’s defense will be that they fixed it, and had no liability to tell the buyer, and the buyer will respond that the sellers fix failed. This firm counsels sellers to disclose what they know, and not try to hide behind the statute, unless you want your legal matter to end up in court. In addition, we strongly recommend sellers and buyers make all notifications in writing!

Exceptions to Disclosure Requirement.

The seller disclosure requirements do not apply in seven instances, including (1) foreclosure, (2) inter-family gifts, (3) transfers between divorcing spouses or domestic partners, (4) most inter-owner buyouts, (5) a transfer of a real property interest that is less than fee simple, (except a transfer of a vendee’s interest under a real estate contract), (6) a transfer by a personal representative for the estate of a decedent, and (7) a transfer where the buyer expressly waives receipt of the seller disclosure.[iii] Even though Washington law allows the buyer to waive receipt of the disclosure form,[iv] if the answer to any question on the “Environmental” section of the disclosure form would be “Yes,” then the buyer cannot waive receipt of the disclosures.[v] Obviously, for a buyer to not waive receipt of the disclosure requires the seller to create one in the first place.

Remedies for non-disclosure.

The seller is liable for any error, inaccuracy, or omission in the real property transfer disclosure statement if the seller had actual knowledge of the error, inaccuracy, or omission.[xvii] If the seller does not promptly and properly disclose all the items listed outlined in the statutes, then the buyer has the same rights or remedies they would pursuant to common law, statute, or contract.[xviii]  Finally, the only new statutory “right or remedy”[xix] (actually a power, not a right) created in the Washington legal regime we have discussed is that of a power to rescind the contract, i.e., the power for the buyer to get out of the contract and recoup their earnest money funds. However, the time frames and notice requirements must be strictly adhered to, so that the buyer and seller can avoid legal trouble, and any notice of the exercise of a right of rescission must be in writing.[xx]

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Note: This post is not legal advice, and should not be relied upon as such. Different sets of facts will likely lead to different legal conclusions. If you need assistance with real property matters, call Macomber Law, PLLC at 866-511-1500 for a forty-five minute, no charge consultation to see if we can help.

[i] The Revised Code of Washington (“RCW”) defines “improved residential real property” as real property with one to four residential dwelling units, certain residential condominiums, residential timeshares (unless subject to written disclosure by law), and mobile or manufactured homes. RCW § 64.06.005(2).

[ii] “Unimproved residential real property” is property zoned for residential use that is not improved by any of the above, and it does not include commercial real estate or property defined as “timberland” under RCW 84.34.020, see RCW § 64.06.005(5).

[iii] RCW §§ 64.06.010(1-7)

[iv] RCW § 64.06.010(7).

[v] Id.

[vi] RCW §§ 64.06.013; 015; and 020.

[vii] Id.

[viii] Id.

[ix] RCW § 64.06.013.

[x] Id.

[xi] Id.

[xii] RCW § 64.06.030.

[xiii] RCW § 64.06.030

[xiv] RCW § 64.06.040.

[xv] RCW 64.06.040(1).

[xvi] Id.

[xvii] RCW § 64.06.050(1).

[xviii] RCW § 64.06.070.

[xix] RCW § 64.06.070.

[xx] RCW § 64.06.030.