Oregon’s Long-Ignored Seller Property Disclosure Form – PART ONE

Posted on by Phil Querin

Introduction. Oregon’s property disclosure law was first created in the 1993 Legislative Session – nearly 30 years ago. This was back when the idea of sellers having to “disclose” any information about their homes was a foreign concept. Short of outright fraud, caveat emptor[1] was the rule of the day. Of course, if a seller intentionally misrepresented the condition of their property, it was actionable – but sellers were not then required to make any disclosures, thus leaving buyers to learn as much as they could about the property on their own, before making an offer.

In fact, the concept of “disclosure” was so foreign at the time, that the Oregon legislature gave sellers the right to select between it and “disclaimer”. Thus, residential sellers had a choice between using one of two forms: (a) They could either answer a series of statutory questions about the property (“Disclosure”), or (b) tell their buyer nothing (“Disclaimer”). To lawyers advising their seller-clients, this was a no-brainer – always disclaim.

Both forms permitted buyers a fixed period of time following delivery of the disclosure of disclaimer form to withdraw from the transaction (called the “right of revocation”). This will be examined more closely in Part Two.

It was not long before the Disclaimer option eventually disappeared. Today, the law provides that unless exempted (e.g., new construction sales; sales by court-appointees; foreclosure sales, etc.), all sellers of one-to-four family homes (including condominiums and townhomes) are required to give their buyers a Seller’s Property Disclosure Statement (“SPDS”).

Seller Property Disclosure Today. Fast-forwarding to today, we see that some things have not changed. Most of the questions in the SPDS remain the same; many are poorly worded and suggest that each section was drafted by a separate group, each relying upon their own specialty, such as plumbing, heating, cooling, electrical, land use, title, condominium, etc. There appears to have been no effort to follow uniform style and syntax. Inexplicably, after nearly three decades, most of these questions remain unchanged today.

  • Some require knowledge of the law: “Is the property being transferred an unlawfully established unit of land?”;
  • Others require land use knowledge: “Are there any governmental studies, designations, zoning overlays, surveys, or notices that would affect the property?
  • Some questions refer only to the time of the sale: “Are there any sewage system problems or needed repairs?” This question ignores past problems.
  • Others refer to conditions that could have occurred at any time over the duration of a seller’s ownership: “Has the roof leaked?”

And perhaps the most open-ended of questions comes out of the blue at the end of the form:

  • “Are there any other material defects affecting the property or its value that a prospective buyer should know about?”[2] Not only does this question ask how a defect affects the home’s value (while all other questions relate solely to its condition) it requires the seller to know what issues are important to each buyer – metaphoricaly, it asks sellers to become mind-readers.

I do not suggest these topics are unimportant – but believe that many questions are simply beyond the ability of most sellers to answer with certainty. I suspect that less than 20% of sellers can answer all the questions with any degree of confidence.

The only saving grace in the legislation is that it expressly provides that sellers’ answers are based only upon their “best knowledge”- they are not guarantees or warranties. Thus, being wrong is permissible; it does not automatically make a seller liable; liability may only attach if the buyer can establish (through clear and convincing evidence[3]) that their seller knew an answer was false.[4]

And since most real estate listing agents try to avoid having their fingerprints on the SPDS,[5] many balk at answering their clients’ questions seeking direction or interpretation. This leaves sellers on their own.

Lastly, the SPDS form and its enabling legislation contain one glaring 28-year-old error. While the language of the form dictated by ORS 105.464 states at the beginning and end of the document that buyers have “five days” from delivery of the disclosure statement to give notice of their intent to exercise their right of revocation, the text of ORS 105.475(1) says that right commences after “five business days” following delivery.

The 28-Year-Old Mystery. How is it that for over a quarter of a century the Oregon real estate industry has ignored the admitted sloppiness of a form it had a major hand in creating?

The oft-quoted meme used to explain this anomaly is that doing so would open up the form to other stakeholders and consumer advocates (e.g., environmental, zoning, fair housing, conservation, noise pollution, etc.) who would expand the list of required disclosures into an unwieldy amalgam of questions – akin to California’s approach to seller disclosure.

Based upon this rationale it’s a wonder the U.S. Constitution was ever amended. Perfect has become the enemy of good. ~ Phil

[To   be continued.]

______________________________

[1] “Buyer Beware”

[2] This is like asking a witness on the stand before stepping down: “Is there anything else you have not told the jury that they would want to know?”

[3] The burden of proof for fraud and misrepresentation.

[4] Liability can also attach if the seller “recklessly” made a statement without any basis. This is a more complicated analysis but can be a trap for the unwary seller.

[5] For fear of being brought into a buyer vs. seller claim and accused of having recommended the seller’s answer.

Posted in Legislation - Oregon, Miscellany, News You Can Use, Oregon Law, Property Disclosure, Real Estate General, Real Estate Laws, Realtor Risk Management, Residential Housiing, Townhomes | Tagged , ,
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