The sidebar on page 21 of the September/October 2010 edition of Commonwealth titled “What the lawyers advise,” has created confusion in the course of attempting to explain the history of the Residential Property Disclosure Statement.  Specifically, the sidebar creates confusion as to the obligation to disclose latent defects.

Let’s clarify disclosure obligations:

  1. A listing agent must disclose to prospective buyers material adverse facts pertaining to the physical condition of the property of which he has actual knowledge.  Please note that an important component of the previous statement is that he has knowledge of a material adverse fact. Example: If a seller has actual knowledge of a basement leak and does not tell the listing agent, the listing agent has no disclosure obligation because he has no “actual knowledge” of a basement leak.  Keep in mind that actual knowledge can be gained in several ways, such as the listing agent seeing the leak in the basement herself. Article 2 of the Realtor Code of Ethics also tells us that we have no duty to discover latent defects in the property.
  2. Sellers have no duty to disclose material adverse facts pertaining to the physical condition of the property other than the limited disclosures in the Residential Property Disclosure Statement.  However, they may not willfully conceal defects or induce a buyer to forgo an inspection through false means.