When In Doubt, Disclose, Disclose, Disclose
November 21, 2014
By David Allen
A man named Joe who lives and works in Chicago, decided he wasn’t getting enough use out of his second home in Scottsdale which is located on the 15th fairway of a very challenging golf course. With some regret, he decided to put his house up for sale. A buyer is quickly procured and Joe’s listing broker presents him with a form to fill out entitled “Residential Seller’s Property Disclosure Statement,” commonly referred to as a “SPDS” (pronounced “spuds.”) The SPDS is full of specific questions, as well as general ones, designed to provide an opportunity for a seller to disclose to a potential buyer all of the “blemishes” that exist with the property being sold. One of the questions asks: “What other material (important) information are you aware of concerning the Property that might affect the buyer’s decision-making process, the value of the property, or its use?”
Back before case law imposed upon a seller the legal obligation to affirmatively disclose negative facts about their property, it was commonplace for buyers to be advised to “beware” of what potential problems might exist, that were neither readily apparent nor disclosed by the seller. This led to countless lawsuits brought by unhappy buyers, who only were able to discover after they completed their purchase that what they bought was not exactly what they thought they were buying. To “level the playing field” the Courts started to impose requirements on sellers to make “full disclosure.” The SPDS became part of the standard documentation in a residential real estate transaction in order to compel a seller to fulfill their disclosure requirements. In an Appellate Court decision rendered in February of this year, the Court stated that “a seller may be required to disclose information when the buyer reasonably cannot discover the information for himself.”
When reviewing Joe’s scenario and his golf course home, as it happens, most recreational golfers are unable to mimic the golf shots made by the professionals whom they attempt to emulate. As a result, a fair number of golf balls take flight toward Joe’s house rather than the golfer’s intended destination on the 15th green. In fact, Joe has to hire a painter to paint and patch his home at least three or four times per year to repair the indentations or holes caused by the balls hitting the home. The pool repairman has to fish at least a dozen balls a week out of the swimming pool on the property. And when Joe makes the trip to Arizona to visit with his grandchildren, he will not allow his grandchildren to play in his backyard due to his fear of his grandchildren being struck by an errant ball.
Given these facts, is the frequency of golf balls that come onto the property “important information that might affect the buyer’s decision-making process?” Is this information that the buyer cannot “reasonably discover for himself?” While Joe might argue that a person who buys a home on a golf course fairway should expect that some golf balls will come onto the property, how many golf balls are “some” and how many are unexpectedly excessive?
In that the courts are seemingly inclined to place an ever increasing obligation on sellers to make full disclosure, Joe would be well advised in this situation to affirmatively disclose the “golf ball issue.” Doing so will avoid a potential lawsuit brought by the buyer once the buyer discovers for himself, after completing his purchase, that his home might have just as well been located on the driving range rather than the golf course.
David Allen, a partner in the Phoenix law firm of Jaburg & Wilk, has been representing clients in both transactional and litigation real estate and business related matters for over thirty years. He is licensed as an attorney in both Arizona and California, and is also a licensed Arizona real estate broker. He can be reached at 602.248.1082 or at firstname.lastname@example.org.
This article is not intended to provide legal advice and only relates to Arizona law. It does not consider the scope of laws in states other than Arizona. Always consult an attorney for legal advice for your particular situation.