Property Inspection Rights

 

QUESTION #1: Must a seller provide a disclosure form to its buyers?

Must a seller of real property in Colorado provide a completed Real Estate Commission approved Real Property Disclosure form to its buyers?

Only if the Real Estate Commission contract form is used. The form’s paragraph 10 requires such a disclosure. Otherwise, the answer is “no.” This is true regardless of whether brokers are involved in the transaction.

However, regardless of what form is used, sellers do have a duty to disclose to purchasers material “latent” defects of which they are aware. In general, latent defects are those which cannot be discovered upon a reasonable inspection of the property. So, for example, the fact that the exterior of a property badly requires painting need not be disclosed to purchasers. However, if a property is being sold in the dead of winter, when it is not practical to inspect the sprinkler system, the fact that the system leaks should be disclosed to potential purchasers.

QUESTION #2: Is dissatisfaction with the school district grounds to terminate a contract?

After entering into their contract on the Real Estate Commission approved contract form, my buyers have investigated the schools which their children would attend and found the schools unsatisfactory. Is their dissatisfaction with the schools sufficient to terminate the contract pursuant to paragraph 10?

The text of paragraph 10 does not precisely answer this question. On the one hand, paragraph 10 contains two references to the “physical condition of the Property and Inclusions” suggesting that the purchaser does not have the right to provide dissatisfaction with other features related to the home. On the other hand, the operative sentence states: “If written notice of any unsatisfactory condition, signed by Buyer is given to the Seller or Listing Company . . . ” [emphasis added], implying that purchaser may object to any feature relating to the property, regardless of whether the feature is a physical condition.

QUESTION #3: Can a buyer use Paragraph 10 to terminate a contract?

After entering into his contract, my buyer realized that, because of the property’s steepness, it would only be accessible in the winter to a four-wheel drive vehicle. My buyer could afford to, but does not want to get a four-wheel drive car. (1) Can he still use paragraph 10 to terminate the contract? (2) Does it make a difference that the buyer, and not his property inspector, discovered the problem?

(1) Yes. Paragraph 10 clearly provides that a purchaser may object to any physical condition of the property. The language does not require the objections to be “reasonable.” Presumably, the drafters of the language understood that requiring a “reasonable” dissatisfaction would lead to arguments and litigation. The language suggests that the purchaser can be unreasonable, if not whimsical. While this may seem unfair to sellers, in the long run the phrasing helps avoid disputes over whether a purchaser’s dissatisfaction was reasonable or not.

(2) No. There is nothing in the language limiting purchaser’s dissatisfaction to those matters revealed in a property inspection.

 

A version of this article appeared in the Colorado REALTOR® News, the monthly publication of the Colorado Association of REALTORS®.

Jon Goodman is a shareholder with Frascona, Joiner, Goodman and Greenstein, P.C., a Colorado law firm. His practice areas include Real Estate,Brokerage Law, Contracts, Land Use, Leasing, Real Estate Title, Association Law, Business Law, and Finance. Contact Jon Goodman.

Disclaimer — Content is general information only. Information is not provided as advice for a specific matter, nor does its publication create an attorney-client relationship. Laws vary from one state to another. For legal advice on a specific matter, consult an attorney.

JONATHAN A. GOODMAN