Preliminary Observations On Four New Disclosure Laws
By David Hamerslough and Victoria B. Naidorf
This article highlights three new seller disclosure laws that immediately impact residential real estate transactions and one new real estate broker disclosure obligation. We are also providing preliminary observations regarding all four.
Third-Hand Smoke Disclosures
Civil Code § 1102.6k (effective as of January 1, 2026) has been added to read as follows:
“(a) In addition to any other disclosure required pursuant to this article, it shall be the sole responsibility of a seller of a single-family residential property subject to this article who has actual knowledge of the existence of any residue from smoking tobacco or nicotine products, or any history of occupants smoking tobacco or nicotine products on the property, to disclose that knowledge to the buyer in writing.
(b) For purposes of this section, the following apply:
(1) “Residue from smoking tobacco or nicotine products” means a chemical accumulation resulting from the smoking of tobacco or nicotine products, and may be indicated by the smell of tobacco smoke or by test results that indicate elevated levels of nicotine on surfaces or in dust.
(2) “Smoking tobacco or nicotine products” includes the use of an electronic cigarette or vape device for inhaling an aerosol.”
The text of the bill finds and declares (a) “third-hand smoke” accumulates in carpets, walls, and furniture, becomes embedded in building materials, and persists for years after smoking stops and (b) third-hand-smoke-polluted buildings expose occupants to more than 10 toxic chemicals listed in Proposition 65 (1986).
Health & Safety Code § 25417.2 now reads “Third-hand smoke means the toxic chemical residue left behind by tobacco smoke.”
This Health & Safety Code section and Business & Professions Code § 10084.2 require that the Homeowner’s Guide To Environmental Hazards be updated to inform consumers on this subject, including the significance of third-hand smoke as a common environmental hazard and what can be done to mitigate this hazard and identify sources that can provide more information on the subject.
See below for how this new disclosure topic is to be implemented.
Disclosure Statement For An Inspection By A Qualified Professional Of The Electrical System(s) Of The Property
Civil Code § 1102.6i has been amended (effective January 1, 2026) to state the following:
“(a) Except as provided in subdivision (b), on or after January 1, 2026, in addition to any other disclosure required pursuant to this article, the seller of any real property subject to this article, or the seller’s agent, shall deliver to the prospective buyer a disclosure statement that provides as follows: “In a purchase of real property, it may be advisable to obtain an inspection by a qualified professional of the electrical system(s) of any buildings, including, but not limited to, the main service panel, the subpanel(s), and wiring. Substandard, recalled, or faulty wiring may cause a fire risk and may make it difficult to obtain property insurance. Limited electrical capacity may make it difficult to support future electrical additions to the building(s), such as solar generation, electric space heating, electric water heating, or electric vehicle charging equipment.
(b) This section does not apply to the sale of a building within three years of the issuance of the certificate of occupancy for the building.”
See below for how this new disclosure topic is to be implemented.
Disclosure Regarding Gas-Powered Appliances
Civil Code § 1102.6j (effective January 1, 2026) has been amended as follows:
“… the seller of a single-family residential property subject to this article shall disclose, in writing, the existence of any state or local requirements or restrictions relating to the future replacement of existing gas-powered appliances that are being transferred with the property to the extent they or their agent are aware of those requirements or restrictions. For purposes of this section, “gas-powered appliance” includes, but is not limited to, appliances fueled by natural gas or liquid propane.”
See below for how this new disclosure topic is to be implemented.
Preliminary Observations On These 3 New Seller Disclosure Laws
1. Each of these three seller disclosure laws applies to any transaction for which a Transfer Disclosure Statement (TDS) is required (generally, residential 1-4, including personal property mobile homes and manufactured homes, and leases of more than one year). The same exemptions and statutory cancellation rights apply to this law as with other TDS disclosure requirements.
2. Although the legislation implies that the TDS is being changed, the statutory form was NOT changed to include these new disclosures. The PRDS Supplemental Seller’s Checklist (SSC) and the C.A.R. Seller Property Questionnaire (SPQ) will therefore need to incorporate the provisions of these new laws. Use of the SSC and SPQ is contractually required in any transaction for which a TDS is required, which will provide a document for each of these disclosures.
3. While one of these statutes states that it is the “sole responsibility of the seller” to make the disclosure regarding third-hand smoke, please remember that any real estate licensee having actual knowledge of a material fact, such as any noticeable odor, has a separate and independent duty to disclose that material fact to all buyers.
4. Even if the transaction is exempt from the requirement to provide a TDS, it may be possible that upset buyers and their attorneys may claim that the legislative requirement that each of these disclosures be made makes this information a material fact, thereby triggering a common-law duty to disclose this information in a transaction that is exempt from the TDS disclosure requirements.
5. With regard to third-hand smoke, to the extent that the statute states that “residue from smoking tobacco or nicotine products … may be indicated by the smell of tobacco smoke,” this issue may now be considered part of the licensee’s reasonably competent inspection of a property and should be included in the section entitled “Other” in an AVID. Remember, we have long advocated that the agent’s inspection not be limited to what is visible, but also what one can smell and hear.
6. It is unclear what level of inquiry, if any, is going to be required by the seller’s agent of the seller if the seller’s agent smells tobacco smoke and the seller has not disclosed same? Consider recommending that sellers be as candid as possible about odors, even those that they have grown accustomed to smelling.
7. What level of inquiry, if any, is going to be needed by a buyer’s agent of the buyer if their client is sensitive to or concerned about issues related to not only third-hand smoke but also the subject of smoking in general? What testing will be available to assist a buyer in evaluating these issues? Whether a buyer has addressed this issue in the PRDS BNWA and the C.A.R. BIPP, BFPI, and BMI-SP or in another communication may be the starting point for a discussion of this subject.
8. With regard to the disclosure regarding an inspection of the electrical systems, buyers and sellers and their respective real estate licensees may want to consider the following with respect to this subject: (a) to what extent does a home inspection report or inspection by a licensed general contractor identify any issues with the electrical system, what risks any condition represents, and what follow-up evaluation/investigation is recommended?; (b) if a potential issue is identified, what is the impact on the ability to obtain insurance, what is the potential cost of any upgrades or retrofits, and what is the potential for delays from PG&E in energizing upgraded service or metering new panels because of high demand once the operative dates of these new laws and requirements go into effect?; (c) if a client is anticipating remodeling/renovating the property, to what degree, if any, will relevant City or County codes require an upgrade or retrofit? (d) to what degree are government rebates potentially available?; and (e) can these investigations/evaluations be completed during the buyers’ contingency?
9. With regard to the disclosure regarding gas-powered appliances, please recognize that there are different governmental entities that have addressed this subject (e.g., State of California, counties, cities, and air quality management districts). The rules that each of these entities have may not be the same, so it is important to determine which entities have jurisdiction over a particular property.
We understand that as of 2030, California will be banning the sale of new gas furnaces and water heaters that do not meet certain emission standards. While this law does not currently ban gas stoves, some cities and/or counties may begin to restrict gas appliances (including stoves) in “new construction.” We also understand that the California Building Code requires that all “new homes” must use zero-emission appliances as of this year.
The Bay Area Air Quality Management District, which controls, among others, San Mateo and Santa Clara Counties, currently has the following rules that are slated to go into effect: as of January 1, 2027, a water heater that emits NOx emissions will not be allowed to be sold or installed in the Bay Area. As of January 1, 2029, a similar rule will apply to gas-powered furnaces. These rules only apply to appliances that would be newly installed and do not require the change-out of already existing water heaters or furnaces. The rules are currently limited to natural gas-fired furnaces and water heaters; they do not apply to stoves, dryers, or other appliances. These rules do not apply to gas-powered stoves at this time. They also do not apply to propane-fired water heaters or furnaces.
10. With regard to the subjects covered by all of these new disclosure laws, please distinguish between a disclosure obligation (which requires actual knowledge) and a fiduciary obligation that a licensee may owe to a buyer and/or seller. based upon agency relationships and any corresponding fiduciary obligation that arises as a result of such a relationship.
While an analysis of fiduciary obligations and whether they have been met turns on, among other things, the facts, circumstances, questions asked by the buyer, and any discussions between the buyer and the buyer’s agent or others, potential issues relating to all of these disclosures may be impacted by findings and recommendations in home inspection reports or reports by general contractors, as well as what responses a buyer has provided to the PRDS BNWA and the C.A.R. BIPP, BFPI, and BMI-SP or in other communications.
11. Documenting a client’s needs and wants/personal preferences and any discussion regarding same may eliminate potential misunderstandings or differences in recollection in the event of a subsequent dispute.
New Real Estate Broker Disclosure Regarding Digitally Altered Images
Business & Professions Code § 10140.8 (effective January 1, 2026) provides as follows:
(a) (1) A real estate broker or salesperson, or person acting on their behalf, who includes a digitally altered image in an advertisement or other promotional material for the sale of real property shall include in the advertisement or promotional material a statement disclosing that the image has been altered and a link to a publicly accessible internet website, URL, or QR code that includes, and clearly identifies, the original, unaltered image. The statement shall be reasonably conspicuous and located on or adjacent to the image and shall include language indicating that the unaltered images can be accessed on the linked internet website, URL, or QR code.
(a) (2) If an advertisement or promotional material described in paragraph (1) is posted on an internet website over which the real estate broker or salesperson, or person acting on their behalf, has control, they shall include the unaltered version of the images from which the digitally altered images were created in the posting. A person subject to this paragraph may comply with this requirement by including a link to a publicly accessible internet website that includes, and clearly identifies, the original, unaltered image. If the real estate broker or salesperson, or person acting on their behalf, complies with this requirement by including a link to the unaltered images, the statement required by paragraph (1) shall include language indicating the unaltered images can be accessed on the linked internet website, URL, or QR code.
(b) (1) For purposes of this section, “digitally altered image” means an image, created by or at the direction of the real estate broker or salesperson, or person acting on their behalf, that has been altered through the use of photo editing software or artificial intelligence to add, remove, or change elements in the image, including, but not limited to, fixtures, furniture, appliances, flooring, walls, paint color, hardscape, landscape, facade, floor plans, and elements outside of, or visible from, the property, including, but not limited to, streetlights, utility poles, views through windows, and neighboring properties.
(b) (2) “Digitally altered image” does not include an image where only lighting, sharpening, white balance, color correction, angle, straightening, cropping, exposure, or other common photo editing adjustments are made that do not change the representation of the real property.
Preliminary Observations On This Statute
1. The statute applies to brokers, salespersons, or persons acting on their behalf. This would include personal assistants, transaction coordinators, and third-party photographers and videographers.
2. The statute applies to the sales of real property but not to rentals or leasing of real property.
3. The statute applies to alterations that add enhancements and those that delete negative features and/or characteristics (e.g., eliminating telephone poles, power lines, cell towers, etc.).
4. Please note what is excluded from this new law (common and minor improvement of an image that does not substantially alter its nature or content). How to make that distinction may be difficult.
5. Please note what is required if an image has been digitally altered.
6. Please check with your local MLS to see if they have any other requirements, as well as what consequences the MLS may impose in the event of a violation.