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Historical Documents and Facts and the SSC and Revised SPQ

By David Hamerslough

December 14, 2021

When a buyer sues a seller for failure to disclose a material fact, the buyer must prove, among other elements, that the seller had actual knowledge of the material fact. Historical documents are one type of evidence that can establish actual knowledge, or a lack thereof, on the part of the seller.

Broadly speaking, historical documents include all documents that precede the sale of the property. They include documents in the seller’s possession, custody, and control, as well as those maintained by other sources such as governmental entities, real estate brokers, contractors, etc.  With respect to documents that are in the possession, custody, and control of the seller, one way to categorize these historical documents is as follows: (1) documents received during the purchase of the property; (2) documents received and maintained during the seller’s ownership, including those relating to the improvement, renovation, alteration, repair, and/or maintenance of the property; and (3) those related to the listing, marketing, and sale of the property.

While not every seller systematically maintains their historical documents in these or other categories, many  sellers maintain a file or a box of important papers regarding their ownership of the property. Whether the seller retrieves and reviews that file before filling out any disclosures as part of the sales process may become critical in any subsequent claim.  Equally important is whether that information/documentation is known to and/or made available to the listing broker and/or the buyer.  The proper use and disclosure of historical documents as well as the facts that are contained in that documentation are some of the issues that have frequently been the subject of nondisclosure claims not only between the buyer and seller but also between those parties and their respective real estate brokers.

The PRDS Forms Committee recognized the potential impact that historical documents could have on claims involving buyers, sellers, and real estate licensees, especially in view of the fact that the state-mandated Real Estate Transfer Disclosure Statement (“TDS”) only requires that the seller provide information and/or facts (as distinguished from requiring delivery of documents) about the property.

To better facilitate the disclosure process and correct the omissions in the TDS, PRDS took the following actions: (1) a question in the Supplemental Seller’s Checklist (“SSC”) regarding the seller’s knowledge and possession of historical documents was moved from the back of the SSC to page one; (2) detailed definitions of what documents could be classified as “historical” were added to page one of the SSC; (3) additional advisory language was included prompting the seller to attach any historical documents; (4) questions about historical documents, their existence, and their production by the seller were added throughout the SSC; and (5) the PRDS Seller Advisory Regarding Completing The TDS And Other Disclosure Documents form was created.  Historical documents are discussed in that advisory, and this advisory is referenced as a “seller caution” on page one of the SSC.

The California Association of Realtors (C.A.R.) followed PRDS by introducing its advisory to sellers regarding filling out disclosure documents, entitled the Disclosure Information Advisory (“DIA”). This advisory discusses, among other subjects, the need for sellers to review and provide historical documents to buyers.

At the time the DIA was introduced, C.A.R. did not make any changes to its Seller Property Questionnaire (“SPQ”).  The SPQ contained a question regarding historical documents in the last section of the form entitled “Other.”  This question was 17(A) in the June 2018 version of the SPQ. The location of this question, the wording used in the title to this section and within the question itself, and other factors have often resulted in this question being answered in the negative and without the production of any historical documents by the seller other than inspection reports obtained in conjunction with the listing of the property.

Effective December 2021, C.A.R. has revised the SPQ to address some of the issues relating to historical documents.  Question 17(A) has been moved from the last page of the SPQ to page one.  It is now Question 5 and is entitled “Documents.”  While the question still asks the seller to identify if they are aware of any historical documents and produce any such documents if they are in the seller’s possession, the question now specifies that the seller should do so whether those historical documents were “prepared in the past or present, including any previous transaction, and whether or not Seller acted upon the item.”

The obligation on the part of the seller to produce any historical documents that are in the seller’s possession has also been highlighted by a separate sentence. This sentence reads “Note: if yes to [question] 5, provide any such documents in your possession to Buyer.”  While this instruction existed in the prior version of the SPQ (buried at the end of the form), separating it out as they now have will hopefully assist sellers in understanding their obligation to produce their historical documents.

Another revision to the SPQ is a new “Note to Seller” contained on page one. This note advises the seller to review the DIA before completing the SPQ. This note is similar to the seller caution that already exists in the SSC.

Several other noteworthy revisions have been made to the SPQ. Question 4, regarding the definition of “Seller Awareness,” now includes a statement that a “yes” answer is appropriate to any question “no matter how long ago the item being asked about happened or was documented unless otherwise specified.”  In addition, the words “past or present” have been added to many questions to highlight that sellers need to disclose historical issues, conditions, and/or defects s if the seller is aware of them (e.g., see Questions 5, 10(A) and (B), 11(A) and (B), and 18(A)). Collectively, these revisions underscore that a seller should disclose historical facts and issues (as distinguished from providing historical documents) that they are aware of.

As with historical documents, the SSC previously addressed the issue of historical facts and information, including the instruction on page one of the form contained in a bold text box and the use of similar or comparable language in each of the questions that the seller responds to.

The revision that C.A.R. is making this month to its Residential Purchase Agreement (RPA) is receiving most of the focus and commentary within the residential real estate industry. However, the revisions to the SPQ and the potential impact that those changes may have on nondisclosure claims should not be overlooked.  C.A.R. has taken a bold step towards managing the risk that sellers and agents have long faced when critical historical documents and information are withheld from buyers.  It is hoped that C.A.R. will continue to recognize the beneficial effects of the efforts by PRDS to guide sellers to make more thorough disclosures.