Legal FAQs for REALTORS®
— Disclosures Other Than Agency
My seller client knows that his next-door neighbor has applied with the city to change his property’s zoning. Is the seller required to disclose this information to potential buyers? (Updated May 22, 2015)
The seller and the seller’s agent are required to disclose known material facts about the property. Because the zoning change could be something a buyer would want to know before deciding to purchase the property, it’s a good idea for the seller to disclose what he knows about the potential zoning change.
You may want to inform the seller that, as the seller’s agent, you are also required to disclose known material facts about the property.
What must a seller disclose regarding fire detection and safety equipment? (updated Aug. 6, 2007)
Under the new law passed in the 80th Texas Legislature, a seller of a single-family residence will now be required to disclose information regarding the presence of fire-detection and safety devices in the residence. The items that must be disclosed include smoke detectors, hearing-impaired smoke detectors, carbon monoxide detectors, and emergency escape ladders. These changes have already been made to the Texas Association of REALTORS® Seller's Disclosure Notice (TAR 1406).
I took a listing that is going to be a short sale and will require the lender's approval. The seller insists that since the lender is a necessary party to any sale that the seller is not obligated to provide a disclosure notice. Is that true? (updated Jan. 24, 2011)
No. Section 5.008 of the Property Code does not grant a seller an exemption to the requirement to provide the seller's disclosure notice because any sale of the property requires approval by the lender. While the lender's approval may be necessary for the transaction to be successful, the lender is not a party to the contract. Only the seller is selling the property. Remember that the seller's disclosure notice is a risk-reduction tool for the benefit of the seller. The seller does not need to add to his financial problems by risking a DTPA suit for nondisclosure of items that could have been provided to a buyer by the careful preparation of the seller's disclosure notice.
Both TAR and TREC have a seller’s disclosure notice. Can my seller use either form and still be in compliance with the law? (updated May 1, 2014)
Yes, both forms comply with Section 5.008 of the Texas Property Code, which is the portion of the code related to disclosure.
The TREC form is essentially a copy of the statutory minimum information required in the Texas Property Code. TAR recommends that Texas REALTORS® use the TAR Seller's Disclosure Notice (TAR 1406), which has added provisions that provide more information for buyers and is designed to serve as a risk-reduction tool for sellers.
Remember, the Seller's Disclosure Notice is not a contract. The notice should not be part of the contract of the parties and should not be listed as an addendum to the contract.
I occasionally buy older homes that need a lot of work, remodel the homes, and sell them for a profit. I heard that the Legislature made some changes that place the responsibility of complying with the statutory warranties concerning new homes on me. (updated March 6, 2008)
People who buy homes and remodel them by making a material improvement to the home and who do not live in the home for at least one year following the completion of the remodeling are responsible for the statutory warranties for the remodeling work in the same way a builder or remodeler is responsible for the warranties. This is true even though the owner is not required to register as a builder. The key issue here is whether the person buying the home makes a "material improvement" to the home. A material improvement is a modification to the home that increases or decreases the square footage of the living area and also modifies the home's foundation, perimeter walls, or roof. A material improvement does not include modifications that are designed primarily to repair or replace the home's component parts. So, if you occasionally buy a distressed home and remodel the home by making a material improvement, you would be responsible for the statutory warranties for the remodeling work in the same way that the remodeler or builder is responsible even though the you are not required to register as a builder. Note that the contractors that you may use to remodel the home will provide at least the statutory warranties to you in the contracts that you use to engage the contractors. You could have the warranties transferred to the buyer, but you would still be responsible for the statutory warranties to the buyer in the event the transferred warranties were not honored. Additionally, there are third-party warranty companies with whom you can contract to provide and administer warranties to a buyer that covers the statutory warranties of the remodel. For more information, concerning the statutory warranties, visit the Texas Residential Construction Commission's Web site. http://www.window.state.tx.us/trccsunset/
Is the owner of a duplex required to provide a seller's disclosure notice when listing his property? (Updated May 7, 2014)
No. The seller's disclosure-notice requirements in the Texas Property Code only apply to sellers of residential property comprising "not more than one dwelling unit;" however, a seller must still disclose known material defects concerning the property. Therefore, it's a good idea for the owner of a duplex to provide the notice for each side of the duplex.
Any seller should review the seller's disclosure notice and consider the advantages of disclosing information about the property's condition before an offer is made. The notice can be a significant risk-reduction tool.
When must sellers begin giving this additional notice? (updated Aug. 6, 2007)
The fire safety information is required to be given beginning Sept. 1, 2007. Any seller who enters into a sales contract on or after that date should give the potential buyer the updated notice. It is also recommended sellers begin using the new notice form immediately to avoid having to update the notice if the listing does not go under contract before September 1.
My client's home has been on the market for several months. Several buyers have made offers, but none have been acceptable to the seller. We now have a buyer who is interested in buying the property but refuses to sign the seller disclosure notice until the seller updates the notice that was prepared and signed at the beginning of my listing period. Must the seller update the notice, and can the buyer refuse to sign the notice until the seller does? (updated June 24, 2010)
Section 5.008 of the Property Code requires that the notice shall be completed to the best of the seller's belief and knowledge as of the date the notice signed by the seller. While the statute does not require the seller to update the notice, a seller who has acquired material information about the property's condition since filling out the original notice should consider updating the notice or in some other manner providing that information to prospective buyers. The disclosure of such information can greatly reduce the seller's risk of a later claim of or suit for nondisclosure of material problems with the property. The signature of a buyer on any seller's disclosure notice only acknowledges receipt by the buyer of that notice. While there is no statutory mandate that buyers must sign the notice, buyers should cooperate by signing the receipt portion of the notice when they receive the notice. Such a signature could also be helpful should a question later arise concerning whether the buyer received this notice or maybe another seller's disclosure notice provided by a seller containing different information. In any event, if a buyer refuses to sign the receipt for the notice, the broker could note on a copy of the notice the date that the notice was provided to the buyer and that the buyer would not sign the receipt. That noted copy could be retained in the broker's file as evidence of compliance by the broker in furnishing a copy of the notice to the buyer.
Do the seller's disclosure-notice requirements apply to a relocation company? (updated Jan. 1, 2002)
A relocation company that has title to the property is not exempt from the notice requirements. Listing agents should suggest that the relocation company fill out the notice and attach the notice that they received from their employee along with any inspection reports that they have concerning the property.
Two of my listings involve homes that may have a registered sex offender living nearby. There is a sex-offender sign in the yard of a property about two blocks from one of these listings. A neighbor of the owner of the other home sent us a flier describing the sex offender and where he lived. What disclosures are we or our clients required to make about this information? (updated Sept. 17, 2008) o
Article 62.056(e) of the Texas Code of Criminal Procedures provides that an owner of residential real property or any broker or salesperson in a residential real estate transaction shall have no duty to make a disclosure to a prospective buyer or tenant about a registered sex offender. Under this provision of the law, neither you nor the owners of the properties would have a duty to disclose any information that you know about registered sex offenders. However, since it is quite likely that prospective buyers will find out about this information from neighbors or other sources, the listing agent may consider some innocuous method of getting this information to agents for prospective buyers. There are some buyers who might be very disturbed about this information and not want to purchase the property. Some may even breach an existing contract by refusing to close. The seller is better off not being involved at all with this type of buyer. Other buyers might consider this as only one small consideration in their evaluation of the home for possible purchase.
Does a landlord have to provide a Seller’s Disclosure Notice to a tenant entering into a lease? (updated October 26, 2015)
No. The section of the Texas Property Code which requires the notice does not apply to any lease transaction.
What must a seller disclose specifically regarding smoke alarms? (updated Aug. 6, 2007)
Sellers must disclose whether or not their property has working smoke detectors installed in accordance with the smoke detector requirements of Chapter 766 of the Health and Safety Code (as added by House Bill 2118 in the 2007 legislative session). This change has already been made to the Texas Association of REALTORS® Seller's Disclosure Notice (TAR 1406). Chapter 766 requires one- or two-family dwellings to have working smoke detectors installed in accordance with the requirements of the building code in effect in the area in which the dwelling is located, including performance, location, and power source requirements. If a seller does not know the local building code requirements, the seller should check unknown or contact his local building official for more information.
My buyer wants to purchase a residential property owned by an investor who hasn’t seen the property in years. The owner refuses to fill out a seller’s disclosure notice, except to note he has no knowledge of the property’s condition. Is this sufficient disclosure? (updated May 6, 2015)
The Texas Property Code requires a seller of residential real property comprising not more than one dwelling unit to provide a seller’s disclosure notice to the buyer. The Property Code doesn’t offer an exception to the requirement because a seller hasn’t seen or lived in the property. After all, knowledge of the property can come from sources other than a visual examination, such as complaints from tenants or reports from property managers.
Failing to provide a completed seller’s disclosure notice to the buyer may entitle the buyer to certain remedies, like terminating the contract.
Remember, a buyer should never rely upon the information provided by a seller concerning the condition of the property, even in a situation in which a completed seller's disclosure notice has been provided. A buyer should always have his own inspection done to satisfy his concerns about the condition of the property.
My seller told me that a murder occurred at her property before she owned it. Does she have to disclose this information to buyers? (Updated Oct. 31, 2014)
Yes, she should disclose this to buyers. According to the Texas Property Code, sellers aren’t required to disclose deaths on the property that resulted from natural causes, suicide, or an accident unrelated to the property’s condition. However, murder does not fall into these categories.
Your seller can use the TAR Seller’s Disclosure Notice, which includes a question about deaths other than those caused by natural causes, suicide, or an accident unrelated to the property’s condition. The notice also provides space for the seller to explain her answer, but she isn’t required to. She might want to indicate that more information is available upon request.
A seller may want to disclose information about any deaths on the property for a few reasons. A murder occurring on the property might be considered a material fact concerning the property that a buyer would want to know when deciding whether to purchase the property. Also, disclosure by the seller could prevent a scenario where buyers learn about a death on the property from another source and then seek to terminate the contract or seek damages from the seller after the transaction has closed.
My client was named the executor of his mother’s estate after she passed away, and now he’s planning to sell the house she owned. He hasn’t lived in the property, so he has no idea if there are any existing issues. Is he still required to furnish a Seller’s Disclosure Notice to potential buyers? (Updated Jan. 15, 2016)
No. Certain types of sellers, like an administrator or executor of an estate, are not required to provide a seller’s disclosure notice to prospective buyers. The seller should check the box in Paragraph 7B(3) to show that the Seller’s Disclosure Notice is not required. This situation is one of the 11 exemptions found in the Texas Property Code statute regulating seller’s disclosure notices. Click here to see the code, and scroll down to Section 5.008(e), which lists the exemptions. Remember that even though this type of seller is not required to provide a disclosure notice, he must still disclose any known material defects.
My buyer is purchasing his first home. His option period has ended, and it’s eight days from closing. My client still hasn’t received the seller’s disclosure notice, and asked me if he can terminate the contract. Can he? (updated May 11, 2015)
Yes. The One to Four Family Residential Contract (Resale) provides that if the notice is not received, the buyer can terminate at any time prior to closing and the earnest money will be refunded.
My client completed a Seller’s Disclosure Notice before listing his home. After the property was on the market for a few weeks, a storm damaged the roof. He had indicated on the Seller’s Disclosure Notice that he wasn’t aware of any defects regarding the roof, but now he is. Does he have to update the Seller’s Disclosure Notice with this new information? (Updated April 8, 2016)
While the Texas Property Code doesn’t state that a seller is obligated to update the form, common law requires a seller to disclose new information that makes an earlier representation misleading or untrue. This means that the seller must present the new information to the buyer one way or another once the seller becomes aware that his previous representation in the Seller’s Disclosure Notice is no longer true.
Providing an updated Seller’s Disclosure Notice to the buyer is a great way to satisfy common law requirements. Not only will the seller have written evidence that the seller made the buyer aware of the new information, but the seller can then use the updated form going forward (without having to attach an additional disclosure regarding new information).
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