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The following is a test. Pull out the latest version of the Transfer Disclosure Statement (TDS) published by PRDS or C.A.R. and compare it to the prior version. The test is to identify the revision that has been made to the TDS.

Time’s up!

The answer is that new language has been added to Section I of the disclosure. The new language is as follows:

” No substituted disclosures for this transfer.”

The new language adds a third option for the seller to check; the revised form now has a mechanism for the seller to affirmatively tell the buyer that the seller is not providing any substituted disclosures in conjunction with the other disclosures that they are making in the remainder of the form. (A substituted disclosure is a report or other disclosure that is intended to satisfy the disclosure obligations that the seller has in the TDS where the subject matter is the same.)

This change has been made in response to the legislature amending Civil Code § 1102.3 to provide that the definition of a fully completed TDS requires the seller to complete both

Section I and Section II of this statutory form.

Prior to this change, many sellers were not checking any box in Section 1, which meant that they were not choosing to use substituted disclosures. The TDS was fully completed under these circumstances, but the new language eliminates any uncertainty with respect to this issue because sellers can now expressly state that they are not providing any substituted disclosures.

The seller now has three options with respect to substituted disclosures. The seller must check at least one box (but not all three of the boxes) to fully complete Section I of the TDS. A seller is not legally required to check any specific box in Section I, but the seller does need to make a choice regarding which option(s) the seller wants to use.

A seller can

  • check only Box 1 (inspection reports completed pursuant to the purchase contract),
  • check only Box 2 (additional inspection reports or disclosures) and then identify in the blank lines or in an attached addendum the details oli those reports or disclosures, such as the title of the report, the author of the report, its date, the TDS or supplemental disclosure provided by a prior seller, etc.,
  • check Box 1 and Box 2 and provide the appropriate details, or
  • check only Box 3 and indicate that no substituted disclosures are being provided.

The seller should decide whether to provide substituted disclosures and, if so, what those disclosures will be. Sellers can refer to the PRDS Seller Advisory Regarding Completing The Real Estate Transfer Disclosure Statement And Other Seller Disclosure Forms (6/20) for assistance in making that choice. That newly revised Advisory provides an explanation of these issues and the options sellers have on page 2. If a seller still has questions, they should consult with a qualified California real estate attorney.

Sellers will not be able to move past Section I without selecting an option if the disclosure is being provided to them via the current Glide platform. Brokers and agents will not be able to fill in anything in Section I if they are using the Zip platform.

The following are additional considerations that sellers and brokers/agents should be aware of:

  1. A substituted disclosure does not relieve a seller of the obligation to fully and completely disclose all material facts that the seller may know that may affect the value and desirability of the property and/or otherwise fully complete their responses to the questions in the TDS. A substituted disclosure allows the seller to supplement the information that they have regarding the information requested in the TDS;
  2. Whether the TDS is fully completed by the seller should be distinguished from the contractual definition of a fully completed TDS contained in both the PRDS and C.A.R. purchase contracts;
    • Paragraph 10 of the PRDS contract provides as follows: “A fully completed TDS shall (1) have all questions answered by, and include the signatures of, Seller in Sections in I and II, (2) include a disclosure and signature of Listing Agent, if any, in Section III, and (3) include a disclosure and signature by Buyer’s Agent, if any, in Section IV.” NOTE: PRDS recognizes the consistent use of up-front disclosure packets and, by expanding the statutory definition to include the buyer’s agent’s inspection and disclosure, allows for a buyer to be more fully informed about their purchase before negotiating the contract;
    • The PRDS contract also requires the seller to fully complete the Supplemental Seller’s Checklist (SSC) when the seller is legally required to complete the TDS;
    • In contrast, the current version of the C.A.R.-RPA, Paragraph 10(A)(ii), states that a TDS “is considered fully completed if Seller has answered all questions and completed and signed the Seller section(s) and the Seller’s Agent, if any, has completed and signed the Seller’s brokerage firm section(s), or, if applicable, an Agent Visual Inspection Disclosure (AVID)”; and
    • While the C.A.R. RPA requires a Seller Property Questionnaire (“SPQ”) to be completed when a TDS is required, the current RPA does not specifically define what constitutes a fully completed SPQ.
  3. The seller’s broker/agent should review the TDS (and supplemental disclosure(s)) before it is provided to anyone to make sure that all disclosures are fully completed, dated, and signed. Brokers/agents receiving the TDS (or any supplemental disclosure(s)) should review it to make sure it has been fully completed so that the buyer has the benefit of all of the information that is going to be provided in order to make their decisions regarding the purchase; this is also important to avoid an argument that the buyer has waived any issue with respect to whether the disclosures have been fully completed.