Like all states, the District of Columbia once subscribed to the notion of caveat emptor, or “buyer beware,” in real estate sales. This meant, in essence, that sellers of real estate did not have to proactively disclose to buyers any problems or defects in the property, though they were required to honestly answer any questions from the buyer and allow inspections. The doctrine put a lot of responsibility onto buyers’ shoulders -- if they didn’t figure out the problems with a house, they couldn’t hold the seller liable later.
In 1998, DC passed a law requiring all property sellers to make a number of mandatory disclosures to buyers. Unlike in some states, these disclosures are required by law and buyers cannot waive their right to receive them. Fortunately for sellers, DC has included on one form all disclosures a seller must make about the property.
Federal Disclosure Requirements
If your house was built prior to 1978, you will also need to comply with a federal law on property disclosure, namely the “Residential Lead-Based Paint Hazard Reduction Act.” This is a matter of telling buyers of any known lead-based paint, dust, or soil on the property; giving them copies of any written reports of lead evaluations done there; allowing a ten-day period for them to conduct their own tests; and providing them with a pamphlet approved by the U.S. Environmental Protection Agency (EPA).
This pamphlet is available on the “Protect Your Family from Lead in Your Home - Real Estate Disclosure” page of the EPA website.
Preparing a DC Real Property Seller’s Disclosure Statement
The exact language of the Real Property Seller’s Disclosure Statement can be found in Title 17, Section 2708.13 of DC’s Municipal Regulations, and a Word version of the form can be found on the District of Columbia website. Your real estate agent, assuming you use one, will no doubt have a prepared version of the form for your use.
Despite having a real estate agent or broker handling your property sale, it is your responsibility as a seller to fill out the Disclosure Statement. You will, after all, be the one liable if you fail to disclose something. (Brokers have some separate, direct responsibilities toward buyers, however, which we don't discuss in this article.)
The Disclosure Statement will ask you to describe the property’s features and their condition, with respect to the house's structure (such as the roof, chimney, insulation, and windows), systems (such as heating and air conditioning), and appliances and fixtures (such as an oven, dishwasher, pool heater, and fans). It also covers exterior or environmental issues such as drainage, damage to the property, and the presence of wood destroying pests. The Statement also requires you to disclose the presence of any toxic substances such as asbestos, as well as any zoning violations and unrecorded easements.
One of the newest disclosure requirements, added in 2005, requires sellers to disclose whether the property has any significant historical designation or is subject to a historic preservation law. (DC Mun. Regs. Tit. 17, § 2708.13.)
The Disclosure Statement requires you to make all disclosures to the best of your knowledge. If you honestly don’t know whether a particular defect or condition exists, it’s acceptable to check the “No” box on the form. When in doubt, however, your best path is to disclose.
Also, although you do not have to hire inspectors to check the property before you fill out the disclosure form, doing so can be a good idea. That way, you’ll have a chance to repair defects instead of having to disclose them. Also, if buyers ask for specific information, you can give them the inspection report that addresses that area. By doing this, you can avoid being found liable for defects that appear later, as long as they were within the scope of the inspection. (DC Code § 42-1303(c).)
The same disclosures are required for condominiums and cooperatives.
Which Property Sellers Need Not Prepare a Disclosure Statement
A seller is required to use the Disclosure Statement only when selling property containing four or fewer dwelling units. Dwelling units are things like houses or apartments, but can also include any habitable rooms on the property, such as an apartment on top of a garage. (DC Mun. Regs. Tit. 14, § 199.1.)
Further, the Disclosure Statement is required only when the property is transferred through a sale, exchange, contract, or option to purchase and the buyer intends to live on the property. The buyer must express this intent to live on the property in writing. (DC Code § 42-1301(a); DC Mun. Regs. Tit. 17, § 2708.1.)
Finally, certain types of property transfers are exempt from anyone having to fill out the Disclosure Statement. These include:
- court ordered transfers such as probate, bankruptcy, divorce, or eminent domain
- transfers to a mortgagee by a mortgagor in default
- foreclosure sales
- transfers between co-tenants, and
- transfers between family members.
(DC Code § 1301(b).) For a complete description of exempt transfers, see DC Mun. Regs. Tit. 17, § 2708.2.
Timing of Making Disclosures to Buyer
The seller must sign the Disclosure Statement and deliver it to the buyer before the buyer executes the purchase contract or installment sales contract. The seller may deliver it in person, by fax, or by mail.
If the seller fails to deliver the completed Disclosure Statement within this time frame, the buyer may terminate the sale. This means that the Disclosure Statement not only must be delivered to the buyer before the purchase agreement is executed, but the Disclosure Statement cannot leave anything out. In other words, you cannot leave any section blank. If a section does not apply to your property, you must either indicate that you have no knowledge of the issue or it is not applicable. The buyer has five days to tell you, in writing, that the sale is terminated.
If after you have delivered the Disclosure Statement and signed the purchase agreement, the Disclosure Statement becomes inaccurate for any reason, this does not give the buyer cause to cancel the purchase. For example, if you later find out that your home is a historic landmark, the buyer cannot cancel the contract just because you did not include this in the Disclosure Statement. Nevertheless, if you discover the Disclosure Statement is inaccurate shortly after the sale, it is usually a good idea to tell the buyer what you have found.
More Information on DC Disclosure Laws
While it can seem simple enough as a seller to disclose what you know about your property, it is important to take your time in preparing the disclosure form. If you wait until the last minute, you may forget to mention important issues.
Also consider getting professional advice. Even if everything in your home seems to be working property, if the buyer moves in and the roof starts leaking, you may find yourself at the wrong end of a lawsuit. It is often a good idea to get your property inspected and if you have any concerns about required disclosures or liability, to seek out the guidance of a reputable real estate attorney.