In California real estate transactions, the Transfer Disclosure Statement (TDS) is a critical document designed to protect buyers by ensuring they receive comprehensive information about the condition of a property. Governed by the California Civil Code, Sections 1102 – 1102.14, the TDS is a mandatory disclosure that sellers must provide to prospective buyers of residential property with one to four units. Understanding the purpose, requirements, and implications of the TDS is essential for anyone involved in buying or selling property in California.
What is the Transfer Disclosure Statement (TDS)?
The TDS is a statutory form that sellers use to disclose specific information about the property’s condition. This form, required under Civil Code Section 1102.6, is not a warranty but a source of information the buyer can rely on when deciding whether to proceed with the purchase. Even if a property is being sold “as is” or without warranties, the seller is still obligated to complete and provide the TDS.
Key Components of the TDS
The TDS requires the seller to disclose:
- The operational condition of appliances, fixtures, and other property features.
- Defects or malfunctions of the physical property improvements.
- Shared features with adjoining properties, such as walls or driveways.
- Encroachments, easements, and unpermitted additions or modifications.
- Soil conditions, such as fill or flooding issues.
- Major damage from events like fires or earthquakes.
- Zoning violations and neighborhood nuisances.
- Presence of common-area facilities, deed restrictions, or homeowner associations.
- Notices of lawsuits or abatement actions affecting the property.
When is the TDS Required?
The TDS is required for the sale, transfer, lease, or exchange of residential properties with one to four units, including mobile homes. Notably, the requirement to provide a TDS applies even in transactions involving “as is” sales.
Exemptions from the TDS Requirement
- There are specific situations where the TDS is not required, including:
- Court-ordered transfers, such as those involving probate, bankruptcy, or eminent domain.
- Transfers by a fiduciary administering a decedent’s estate, guardianship, or trust.
- Foreclosure-related transfers, including those to a mortgagee or by a trustee in bankruptcy.
- Transfers between co-owners or within a family, such as between spouses or lineal descendants.
- Transfers involving government agencies or under specific tax code provisions.
Seller’s Obligation: Good Faith Disclosure
When completing the TDS, the seller must act in good faith, meaning they must disclose all known information about the property’s condition without intending to defraud or mislead the buyer. This obligation extends to using reasonable efforts to obtain information about the property when certain details are unknown. The seller cannot use the TDS to evade their duty of disclosure, even if the form does not address a specific defect.
Agent’s Role in the TDS
Both the listing and selling agents have responsibilities regarding the TDS. While agents are not responsible for completing the seller’s portion of the form, they must review the TDS for completeness and accuracy. Agents must also conduct a reasonably competent and diligent visual inspection of the property and disclose any material defects they observe.
Delivery of the TDS
The TDS must be delivered to the buyer as soon as practical before the transfer of title. If the buyer receives the TDS after signing the purchase offer, they have three days (if delivered in person) or five days (if delivered by mail) to rescind the contract.
The Local Option Real Estate Transfer Disclosure Statement (LORETDS)
In addition to the standard TDS, some cities or counties in California may require additional disclosures through the Local Option Real Estate Transfer Disclosure Statement (LORETDS). This document provides information about neighborhood-specific issues, such as planned developments or zoning changes that could affect the property’s desirability.
Conclusion
The TDS plays a crucial role in California real estate transactions by ensuring that buyers receive essential information about a property’s condition. Both sellers and agents have significant responsibilities in completing and delivering this form, and failure to do so can result in legal consequences. By understanding the purpose and requirements of the TDS, both buyers and sellers can navigate real estate transactions with greater confidence and transparency.
For more information or to schedule a consultation, please contact Vokshori Law Group at 855 855-2608 or visit www.VokLaw.com to learn more.
