Residential Real Estate Seller's Property Disclosures

In Colorado, real estate brokers and attorneys use a standard contract to buy and sell real estate that has been approved by the Colorado Real Estate Commission. The standard contract requires that the seller complete a property disclosure form that explains the conditions of the property as the seller knows them to be. It is very important for the seller to carefully read each section prior to filling out the disclosure form because different sections have different standards of disclosure.

For example, in a residential sale, the disclosures relating to structural conditions ask: “Do any of the following conditions now exist or have they ever existed,” and goes on to list defects such as structural problems, moisture and/or water problems, damage due to animals, among other items which would be important for a potential buyer to know before signing a contract. However, the disclosures relating to the roof ask: “Do any of the following conditions now exist.” From the plain language of the disclosure form it is obvious that the seller is required to disclose any historic defect prompted in the structural condition section, while the seller only needs to disclose the current condition of the roof.

Carefully reading the disclosure form prior to filling it out cannot be stressed enough! For instance, although the roof section only requires the seller to list conditions that now exist, it has subsections that require disclosure of past issues, such as past roof leak and past damage to roof. In this instance, if the seller knows that there was a past roof leak or past roof damage, such historic damage is a condition that now exists and disclosure is required. Counterintuitive, right?

If a seller fails to disclose known defects which are required to be disclosed on the disclosure form, the seller can be held liable for breach of contract. When filling out the disclosure form, the seller must provide accurate information to the seller’s current actual knowledge. The seller is not required to disclose defects which the buyer may think the seller should have known. Likewise, the seller is not required to inspect the property to find out what could be wrong with the property.

Since the seller only has to disclose what they actually know, all the facts of the transaction must be carefully considered before a buyer asserts a claim for failure to disclose defects. A seller that built and resided in a house will likely have more knowledge of the property condition than a seller that used the house as a rental investment. Similarly, a seller that is a professional engineer or contractor probably will know more about the condition of a property than a seller that has no engineering or construction background.

Proving the seller had actual knowledge of a defect is a difficult task. Additionally, the form real estate contract states that the property is being sold as-is. Therefore, buyers have a difficult burden, which makes it important to have an attorney who knows the ins and outs of failure to disclose cases.

Since the outcome of failure to disclose cases are so dependent on strong legal arguments it is important to have a strong attorney by your side. The attorneys at Jorgensen, Brownell & Pepin, P.C. have many years of experience prosecuting and defending failure to disclose cases.