Real Estate Nondisclosure – Seller’s Good Faith Requirement For TDS Disclosures

The Transfer Disclosure Statement or “TDS” as realtors often refer to it, is the Seller’s mandated disclosure form to be filled out during escrow and delivered to the Buyer.  The 3-page document asks several questions of the Seller and while not part of the sales contract, California Courts have held that a buyer may rely on the information and sellers are cautioned of the same.  In a recent nondisclosure court trial, the issue of whether unpermitted additions to a property were known to the sellers was central to the matter.  These disclosures appeared on the TDS and our buyer contended that these disclosures were untrue.  The question turns on what the law requires of the seller and Cal. Civ. Code § 1102.7 tells us what is expected of the buyer.  Section 1102.7 reads:

“Each disclosure required by this article and each act which may be performed in making the disclosure, shall be made in good faith. For purposes of this article, ‘good faith’ means honesty in fact in the conduct of the transaction.”   Thus, the seller is required to exercise honesty in fact in the conduct of the transaction.  In other words, the seller has to be honest.  For example, if a seller checks the box “no” asking if there are any additions or alterations done without necessary permits, the buyer is entitled to rely on the same.  However, if the seller is unsure, the seller should state that he or she “does not know” whether there are additions or remodels without necessary permits so as to comply with the good faith requirements.  Honesty in fact does not mean the seller can pick and choose what they disclose.

If you are a buyer and you believe there are untruths in the TDS for your transaction, contact one of our nondisclosure and fraud attorneys in Los Angeles, today for a free case evaluation and and no obligation consultation.