Disclosure Requirements

Proper disclosure is important for two reasons:

• To help avoid litigation; and
• To comply with the Commissioner’s Rules, g., A.A.C. R4-28-1101

When in doubt, disclose! If it is material, you must disclose. If it is not material, why not disclose?

• Sellers and brokers are required to disclose any material and adverse fact affecting the value of the property. Hill v. Jones (termite damage) (1986).

• Sellers and brokers are required to disclose any financial or other information that could adversely affect sellers’ ability to close the transaction. Lombardo v. Albu (2000). For example, sellers must disclose to a buyer a pending foreclosure of the property.

• Sellers and brokers are required to provide truthful information when a buyer asks a question. Universal Inv. Co. v. Sahara Motor Inn, Inc. (1980). Note: If Fair Housing Rules prohibit disclosure, answer still must be truthful, e.g., “federal law prohibits this type of discussion.”

• Sellers must exercise reasonable care and competence in disclosing any information to a buyer set forth in the MLS and in the SPDS. ADRE Substantive Policy Statement No. 2005-13.

• Any misrepresentation, intentional or not, is unlawful, even if sellers simply forward information from a third-party that happens to be inaccurate. Powers v. Guaranty RV, Inc., 229 Ariz. 555, 278 P.3d 333 (App. 2012) (this case involved the sale of a motor home).
  • To maintain a private cause of action under the Consumer Fraud Act (the “Act”), a plaintiff must only show “a false promise or misrepresentation made in connection with the sale or advertise of merchandise and the hearer’s consequent and proximate injury.” Powers, 222 Ariz. at 337.  The Court held that the Act does not limit liability to the “originator of the misrepresentation – rather, it broadly extends liability to any person who ‘uses the misrepresentation in connection with the sale of merchandise.’”
  • The Act extends to the sale of real estate. A.R.S. §44-1521(5).

• “As-Is” Addendum does not release sellers from liability for failure to disclose.

• Sellers have the right to reply on positive representation, even if the defect is patent and obvious. Barnes v. Lopez. (1976).

• Statutory disclosures:
  • Affidavit of Disclosure (five or fewer lots in an unincorporated area).
  • Must be provided to a buyer within five days after purchase contract acceptance date.
  • HOA disclosure.
  • Swimming Pool Barrier.
  • Lead-Based Paint.
  • Septic Tanks.

• NO disclosure required, with regard to:
  • Death, suicide, homicide or felony. A.R.S. §32-2156.
    • only applies to the property itself, not to neighbors.
  • AIDS or other diseases not known to be transmitted through common occupancy of the property.
  • Vicinity of a sex offender.