Real Estate Disclosures: What You Say Can Be Used Against You

When selling a property, a seller is required to make a number of disclosures about the property so that the buyer is fully informed about the condition of the property he or she is purchasing.  These disclosures include structural issues, termite infestation, and plumbing problems, among others, and are designed to inform a buyer about issues the buyer may not discover during a regular inspection of the property.

However, there are a number of events that may have occurred at a property which a seller would prefer not to disclose because those conditions or events may make the property less desirable.  These events typically include things such as murder, criminal activity, and occupants infected with HIV, which do not affect the physical condition of the property.  To protect sellers, many state legislatures have passed what are commonly called “stigma statutes.”  Stigma statutes allow sellers to sell their properties without having to disclose specific events that might “stigmatize” the property or make it less appealing to buyers.

Arizona has adopted a stigma statute—A.R.S. § 32-2156.  Under the statute, a seller is not required to disclose whether a property is or has been: 1) the site of a death or felony, 2) owned or occupied by a person exposed to HIV or diagnosed with a disease not known to be transmitted through the common occupancy of real estate, or 3) located in the vicinity of a sex offender.  A seller cannot be liable for failing to disclose any of these facts, and a failure to disclose does not allow a buyer to terminate a contract to purchase or lease a property.  A seller may choose to disclose any of these conditions, but is not required to do so.

However, the Arizona Court of Appeals’ recent decision in Lerner v. DMB Realty, LLC, draws a distinction between what disclosures are not required under the stigma statute, and making disclosures that are truthful.  In Lerner, the buyers of a property asked the sellers why the sellers were selling the property.  The sellers responded that they wanted to move closer to friends.  However, the buyers later learned that the sellers actually moved because a convicted sex offender lived next door.  The Lerner court determined that although Arizona law did not require the sellers to disclose the proximity of a sex offender, the sellers could potentially be liable if they lied to the buyers about the true reason they wanted to move.

Even though Arizona’s stigma statute allows sellers to be silent when it comes to certain conditions relating to properties, sellers must be truthful about what they do tell buyers.  The experienced real estate attorneys at Titus Brueckner & Levine PLC can help you navigate Arizona law.

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