Don't Get Sued: What To Disclose When Selling Real Estate

Don't Get Sued: What Do you Have to Disclose When Selling Real Estate?

The majority of the successful people we serve are real estate investors at some level; whether it's your own office building, your first rental, or even an inherited home or commercial real estate property, at some point you will probably be involved in the sale or purchase of real property. The first rule of asset protection is always the same, don't do things that get you sued, and that includes knowing what you have to disclose to a buyer when selling residential or commercial real estate.

In commercial real estate transactions, sellers have a legal duty to disclose material facts about the property to potential buyers. This includes any known defects, issues, or information that could significantly impact the property's value or desirability. Failure to disclose such information can lead to legal consequences for the seller. 

Key Disclosures:

·       Material Defects:

These are any defects that a reasonable buyer would consider important in making their decision to purchase. Examples include structural problems, pest infestations, or issues with the roof. 

·       Environmental Hazards:

Sellers must disclose any known environmental issues, such as contamination or the presence of hazardous materials. 

·       Legal Disputes:

Any known legal disputes or liens related to the property should be disclosed. 

·       Property Taxes:

Accurate information about property taxes and any potential tax increases should be disclosed.

·       Natural Hazards:

If the property is located in a flood zone, wildfire zone, or earthquake zone, the seller must disclose this information. 

·       Other Material Facts:

Any other information that a reasonable buyer would consider important, such as the property's history, past repairs, or significant renovations, should be disclosed. 

Disclosures Required in Arizona:

In Arizona, sellers of commercial property have a duty to disclose all known material facts to the buyer. This includes any information that the seller actually and personally knows of and that could affect the value or desirability of the property. Arizona has a form sellers property disclosure statement to fulfill their disclosure obligations, the use of which is suggested.

Consequences of Non-Disclosure:

Legal Liability

Sellers who fail to disclose material facts can face legal action from the buyer, including lawsuits for damages.

Breach of Contract 

Non-disclosure can be considered a breach of contract, leading to potential legal remedies for the buyer. 

In commercial real estate transactions, sellers have a legal duty to disclose material facts about the property to potential buyers. This includes any known defects, issues, or information that could significantly impact the property's value or desirability. Failure to disclose such information can lead to legal consequences for the seller. 

The laws regarding these disclosures and complex and vary from state to state, get professional counsel when executing any transaction.  The ROI on the cost of a legal consult that ensures your compliance as part of your transaction costs will pale in comparison to the costs of defense for failing to do so, typically on the first day you have to put a retainer down.