Disclaimers vs Disclosures vs Exemptions

The Oklahoma Residential Property Condition Disclosure Act

The traditional notion of caveat emptor (let the buyer beware) has been significantly modified by state statutes. If you are buying or selling real estate in Oklahoma, the transaction is subject to the Residential Property Condition Disclosure Act (RPCDA). The Disclosure Act requires a “Seller” of a “Property” to deliver, or cause to be delivered, the disclaimer or disclosure statements to the purchaser. “Seller” is essentially defined as a person “attempting to transfer a possessory interest in property”. “Property” is defined as residential real property with one or two units”. Therefore, the basic requirements are triggered when a “Seller” is attempting to sell real property with one or two dwelling units to a “Purchaser”.

In simpler terms, the RPCDA requires a Seller of a home to present a disclaimer, disclosure, or exemption statement to any Purchaser. Chances are, if you do not think you are exempt, you should complete disclosures to the best of your knowledge. When selling a home, it is important to protect yourself against potential lawsuits from home buyers. Depending on the situation, a Seller is required to present one of three statements to the Purchaser- property disclaimer, property disclosure or exemption.

Property Disclosure

A property disclosure is required if a Seller has occupied the property and references any defects to the property the Seller is aware of. According to Oklahoma law, a disclosure is required if the Seller is represented by a real estate agent or if a buyer requests such documentation in writing. The statement shall include whether the Seller has actual knowledge of any defects or information relating to the following: water and sewer systems, structural systems, plumbing, electrical, heating/HVAC, infestation or damage of wood-destroying organisms, weather-related damage, existence of hazardous materials, and any other defects known to the Seller. This is the form you will see in most real estate transactions.

Click here for an example Property Disclosure form

Property Disclaimer

A disclaimer statement is appropriate if the Seller has never occupied the property and has no actual knowledge of any defect. The Seller offers the property as-is, “without representations and warranties as to its condition.” The most common circumstance that permits a disclaimer is when a family member is selling a loved one’s property after death. When a beneficiary gains an interest in the described real property and has no actual knowledge of the property, a disclaimer statement is appropriate. However, a child who is selling their parent’s property would have enough knowledge to complete a disclosure form, especially if it is their childhood home. One of the biggest misconceptions is “flippers” or investment properties. If a Seller has remodeled a property, it is apparent that they do have actual knowledge of said property, even though they never lived there. In such cases, a disclosure form is most appropriate, as the investor has knowledge pertaining to the construction, condition and upgrades.

Click here for an example Property Disclaimer form

Property Exemption

If a Seller has no knowledge of and has never occupied the property, they may be able to complete a Residential Property Condition Exemption Form. There are nine specific circumstances that exempt a Seller from completing a disclosure or disclaimer form. For example, bank owned sales (REOs) and new construction both qualify for the exemption form and are the most common exempt transactions.

Click here for an example Property Exemption form

Property Defects

According to the Oklahoma RPCDA, a defect is defined as “a condition, malfunction or problem that would have a materially adverse effect on the monetary value of the property, or that would impair the health and safety of future occupants of the property”. It is the responsibility of a represented Seller to inform potential buyers of any defects a soon as the property is listed for sale. If a Seller is not represented by an agent, it is still their responsibility to make Purchasers aware of any defects if a potential buyer requests such information via writing. If the Seller becomes aware of a defect after the disclaimer or disclosure statement is delivered to the Purchaser, it is the Seller’s responsibility to amend the paperwork promptly. If a buyer has made an offer to purchase, the offer is void until the buying party has acknowledged receipt of the updated document and confirmed the offer to purchase.

Violating the RPCDA

Most licensed agents are familiar with the RPCDA; however, most non-licensed parties are unaware of the regulations and penalties for violations. If the RCPDA is violated, there are ways to remedy the situation. In most purchase contracts, the Purchaser and Seller agree to settle any and all disputes via mediation and, if unsuccessful, arbitration. If either party does not comply, a civil action lawsuit may be filed.

A Purchaser may make a claim against a Seller under the Disclosure Act on two grounds. First, a Purchaser may seek damages if the Seller did not provide a disclosure or disclaimer statement prior to accepting the Purchaser’s offer. Second, a Purchaser may seek damages if the Seller did not disclose an “actually known” defect. The Disclosure Act limits the recovery to “actual damages,” including the cost of repair or replacement. Additionally, the act states that court costs and reasonable attorney fees shall be awarded to the prevailing party.

The vast majority of the time, Sellers will complete the disclosure form in good faith with complete representation. This does not always warranty the condition of the property; however, the answers given are usually truthful to the best of their knowledge. However, anyone, Purchaser or Seller, conducting a real estate transaction should be familiar with what disclosures are and the legal repercussions of misrepresentation. When making an offer to purchase a property, it is imperative to review the form provided by the seller. The RPCDA is in place to protect you, the Purchaser, when buying your home.

Questions?

I’d love to connect with you! Feel free to reach out anytime with questions regarding Property Disclosures or the real estate process, or to schedule a personalized consultation for listing or buying your home!

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