Are the disclosure statements required on a condo sale?

QUESTION: I represent a buyer who is interested in making an offer on a condo I’ve shown him.  I’ve asked the listing agent for copies of the Residential Property and Owners Association Disclosure Statement and the Mineral and Oil and Gas Rights Disclosure Statement, but she insists that they aren’t required for condo sales.  When I asked why, she said there are two reasons: one, the law only applies to the sale of real property and the owner of a condo doesn’t own the property under the condo, and two, the law only applies to transfers of real estate where there are one to four dwelling units, and the complex where the condo is located has more than four units.  That doesn’t sound right to me.  What do you think?

ANSWER: We don’t think it sounds right either.  The law in question here is the Residential Property Disclosure Act (the “Act”).  Section 47E-1 provides that the Act is applicable to specified “transfers of residential real property consisting of not less than one nor more than four dwelling units.”  According to Section 47E-3, the term “real property” is defined as “the lot or parcel, and the dwelling unit(s) thereon, described in a real estate contract subject to this Chapter.”

Regarding the first reason the listing agent gives for her position that the Act doesn’t apply to condo sales, it’s true that the owner of a condo does not own the real estate under his or her condo in the same way as the owner of a single-family, detached home. However, they do own the real estate on which their condo is situated; it’s just that they own it together or ‘in common” with all the other owners in the complex along with all the other common areas.  Thus, in our view, the sale of a condo unit is a transfer of residential real property as that term is defined in the Act.

As to the second reason given by the listing agent for the inapplicability of the Act to this condo sale, it’s not the total number of units in the condo complex that determines whether the Act applies or not, it’s the number of dwelling units being transferred.  Since this potential sale is for one condo unit, the Act applies and the owner is obligated to provide both Disclosure Statements, assuming that none of the exemptions set forth in Section 47E-2 apply.

Release Date: 06/27/2017

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