What is a seller’s duty to amend a Residential Property and Owners’ Association Disclosure Statement?

QUESTION: Question #14 on the Residential Property and Owners Association Disclosure Statement (“Disclosure Statement”) addresses the material that the dwelling’s water pipes  are made of. The seller of one of my listings checked the “Other” box in question #14 and inserted “Unknown” in the blank. The property is under contract and we’ve received a copy of  an inspection report indicating that the water pipes in the house are made of several different materials, including some polybutylene. My questions are, does the seller need to amend  the Disclosure Statement and am I required to disclose the existence of the PB pipes?

ANSWER: Regarding your first question, Section 47E-7 of the Residential Property Disclosure Act (“Act”) provides that if “the owner discovers a material inaccuracy in a disclosure  statement, or a disclosure statement is rendered inaccurate in a material way by the occurrence of some event or circumstance, the owner shall promptly correct the inaccuracy by delivering a corrected disclosure statement or statements to the purchaser.” In addition, Section 47E-8 of the Act provides that “[a] real estate broker acting as an agent in a residential  real estate transaction has the duty to inform each of the clients of the real estate broker of the client’s rights and obligations under this Chapter.”

Based on the home inspection report, your seller client now has information about what the water pipes are made of. Although that information is not first-hand information, their  “Unknown” answer in question #14 arguably is no longer correct. You should inform the seller of their duty to amend the Disclosure Statement due to a change in circumstances and to  provide the amended Disclosure Statement to the buyer. The seller can accomplish this by checking the appropriate boxes regarding the material the water pipes are made of. In the  alternative, since the seller has the choice of making no representation about the water pipes, the seller could check the “No Representation” box. Section 47E-8 of the Act makes it  clear that an agent who informs the seller of their duty to amend the Disclosure Statement will have no responsibility for the seller’s willful failure to do so; thus, it is important for you to  inform the seller in writing of their duty if someone later questions whether you did it or not.

Regarding your second question, a listing agent is obligated to disclose material facts about a property regardless of whether their seller client chooses to disclose such facts. However, the Real Estate Commission has historically taken the position—reiterated most recently in Section 1 of its 2022-2023 Update Course materials—that the mere existence of PB pipe in  a dwelling is not itself a material fact that a broker is required to disclose.

Having said the foregoing, we recommend that you discuss with the seller the potential benefit of disclosing what the water pipes are made of. If the current contract falls through, the  existence of the PB pipe is likely to be discovered by another interested buyer, and disclosure would close the door on any argument that the existence of the PB pipe was inappropriately concealed, even though there may be no legal basis for such an argument.

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