Seller Disclosure Exceptions Are you requiring the seller to provide the Sellers Property Disclosure when it is not required? Nash & Lodge, PLLP By Stephen J. Nash & Kimberly L. Frank Febraury, 2007 Did you know that the Seller’s Property Disclosure form is not always required by law in certain types of transactions? While the seller may voluntarily provide disclosures regarding the condition of the property in those situations, they are not mandatory and may do more to create problems than to avoid them. As you already know from last month’s article, when both parties agree in writing, the Seller’s Property Disclosure can be waived. But Minn.Stat. §513.54 specifically exempts the seller from having to provide the Seller’s Property Disclosure in the following situations:      Non-residential real property;      Gift Transfers;      Transfers ordered by the court;      Transfers to Heirs of a Deceased Party;      Transfer from one cotenant to another;      Transfer made to a spouse, parent, grandparent, child, or grandchild of the seller;      Transfer between spouses resulting from a marriage dissolution;      A transfer of newly constructed residential property that has not been inhabited;      An option to purchase a unit in a common interest community, until exercised;      A transfer to a person who controls or is controlled by the grantor; or      A transfer to a tenant who is in possession of the residential real property. If you represent a seller in one of the above situations and are not providing disclosures because the sale is intended to be an "as-is" transaction, remember that you still must include the "As-Is" Addendum with the purchase agreement. Never assume that the parties understand that a transaction is an "as-is" deal. The purchase agreement must clearly specify that it is an as-is deal or you may find yourself in the middle of a nasty dispute when the buyer later finds something about the property that he/she objects to. The 2006 MAR As-is Addendum allows either the Seller’s Property Disclosure or Seller’s Disclosure Alternatives form to be completed. In most situations, when dealing with any of the above properties it is best for the Seller to complete the Seller’s Disclosure Alternatives form and to insert on the As-is Addendum and Purchase Agreement a statement disclosing that the party has limited knowledge of the condition of the property and as such any disclosures or statements provided about the property are to the best of his or her knowledge. Don’t get fooled into thinking that just because disclosures as to the condition of the property are not given that it has to be an “as-is” sale. A seller can provide express or implied warranties even though no disclosures are given. When representing a buyer who is not receiving disclosures another tactic is to seek warranties. In other words, while the seller is not willing to represent what the condition of the property is, the seller may be willing to provide some type of limited warranty covering all or some of the property for a stated period of time. The fact that the statute does not require a seller to provide disclosures regarding the condition of the property does not mean that the seller should not voluntarily provide them or that the buyer will not require them. If you are representing a seller you must discuss this issue with them and they must decide whether they will provide disclosures when not required by law. They must consider the legal and the marketing consequences of their decision. If you make the decision for them or have them believe that they are required to provide such disclosures, you will be liable for whatever troubles arise as a result of their disclosure or lack of disclosure. While you are perfectly qualified to discuss the marketing consequences of their decision, don’t provide legal advice concerning this decision. If the seller needs to fully understand the legal ramifications of providing the disclosures in their situation, advise them to seek the advice of an experienced real estate attorney. Don’t forget that each situation has to be considered on its own merits. Certainly a buyer is going to demand representations from the builder in the case of new residential home and the seller should not have a problem representing the quality of their work and the materials used. When a tenant of the property is the buyer why would a seller give disclosures regarding the condition of the property when the buyer is in a better position to know what the condition of the property is? In a situation where the seller does not have to provide disclosures as to the condition of the property and chooses not to, the buyer’s recourse is to make a demand prior to entering into the purchase agreement. Since the seller is not required to provide such disclosure if the seller refuses, the buyers must then decide whether to proceed with the purchase without the disclosures or to walk away. When representing a seller it is important to remember that disclosures or the lack of disclosures are often the basis of a future lawsuit. If disclosures are not required make sure that the seller is aware that they are not required. If the seller is required under statute to give disclosures but has little or no knowledge of the condition of the property consider waiving the disclosure requirement. If disclosures are given make sure that they are carefully thought out and well drafted. NOTICE The foregoing is not intended to constitute legal advice for any specific circumstance, but is intended to reflect broadly applicable principles, under Minnesota law, relevant to a typical situation. Each set of facts and each contract is, or can be unique; the unique facts and specific language of the contract may require a different legal analysis and may result in a different outcome. Before proceeding in reliance upon this or any other general description of law, consult with an attorney competent in the field of practice relevant to your situation. Copyright 2007 Nash & Lodge, PLLP