Oklahoma Disclosures vs. Disclaimers
Does it Apply?
Caveat Emptor and Buyer Beware! These traditional sayings are built into common law and the historical record. However! Oklahoma has turned away from these concepts with the Oklahoma Residential Property Condition Disclosure Act, codified at 60 O.S. 831. But! What makes this statute apply and what does violating it mean?
The first step to analyzing a statute is to determine its breadth (i.e. how and to whom it is applied). Under the RPCDA, property is defined as a residential lot improved with not less than one nor more than two dwelling units. So, it does not apply to commercial, unimproved (vacant), or apartment complexes. It DOES apply to residential sales and duplexes.
Section 838 further limits the Act. A disclosure/disclaimer is not required for a number of deals including (1) pursuant to a court order like divorce or eminent domain, (2) foreclosure transfers, (3) transfers from a fiduciary who is not the owner/occupant (i.e. probate, guardianship, conservatorship or trust), (4) transfers between co-owners, (5) inter-familial transfers (including spouse), (6) mergers, (7) transfers to or from a governmental entities, and (8) newly constructed, previously unoccupied dwellings.
Further, a “defect” is defined as a “condition, malfunction or problem that would have a materially adverse effect on the monetary value of the property, or that would impair the health or safety of future occupants of the property.
Either disclaimer or disclosure form must be completed, signed, and dated by the seller. The signature must be within 180 days of the signature of the buyer.
When to use Disclaimer vs. Disclosure?
So, what is the difference between a Disclaimer and a Disclosure form? A Disclaimer Form, found here, states that the seller does not know if there are any material issues with the property, there is no representation of anything. A Disclosure Form, found here, provides a list of different items and improvements with representations for each one. For example, a Seller must declare if the item is working, not working, unknown if working, or if it is not included in the property. This requires the Seller to have actual knowledge of the property and represents to the buyer the status of different items.
A disclaimer may only be used if the seller is not an owner occupant of the premises. The Seller must have never occupied the property AND has no knowledge of any defect. If the Seller meets either of those criteria, they must use a disclosure form. Further, if the seller gains knowledge after they provide this disclaimer form, but before they accept an offer, they must then provide the Disclosure form. For example, if their realtor discovers a defect or inspections are made prior to accepting an offer, a Disclosure form must be used.
What if the Act is Violated?
A violation of this act occurs in specific circumstances. Pursuant to the act, a purchaser may recover only if: (1) the seller failed to provide a disclosure/disclaimer statement (and any amendments thereto) prior to the acceptance of an offer to purchase, (2) the failure of the seller to disclose a defect which was actually known to the seller prior to acceptance of an offer to purchase, or (3) the failure of a real estate licensee to disclose to the purchaser any defects in the property actually known to the real estate licensee prior to acceptance of an offer to purchase and which were not included in the disclosure statement.
A violation occurs if either (1) the defect was not disclosed prior to the acceptance of an offer to purchase or (2) the inaccurate or omitted information results from an approximation of information by the seller (so long as they identified it as an estimate and did not know the estimate to be false); (3) did not have actual knowledge of the error, or (3) the information was based on a public agency and the seller reasonably believe the information to be correct. Deceptive uses of estimates and intentional omissions are obviously violations of this act.
It is important to note here that Oklahoma courts have held that square footage is not included within RPCDA. See Lopez v. Rollins 2013 OK CIV APP 43. Further, for a realtor, square footage is contemplated under §858-515.1. It is also important to note that violations under the RPCDA have a statute of limitations of only 2 years from the date of transfer/conveyance (not the date of discovery of the issue).
The act provides that, if you prevail on your claim, the seller or real estate licensee is only liable for the actual damages (including the cost to repair the defect). The plaintiff cannot obtain exemplary or punitive damages. Further, if a realtor has violated the RPCDA, it is grounds for revocation of their license under 858-312. Finally, revoking a deed is also not a remedy for a failure to disclose and therefore, the RPCDA is not grounds for return of the property or invalidation of the transaction.
What are the Realtor’s Duties & Obligations?
A real estate licensee representing the seller must obtain a disclaimer/disclosure statement from the seller and provide such statement to potential purchasers prior to acceptance of an offer to purchase. Further, a real estate licensee representing the buyer also has the duty to obtain and provide a disclaimer/disclosure statement to the buyer. Therefore, BOTH realtors on BOTH sides have a duty to have either a disclosure or disclaimer executed.
Further, for issues discovered by or known by a real estate licensee, there is also a duty to disclose. For example, if a realtor discovers something after the disclaimer was executed, the realtor must inform the other party of the discovery. However, a licensee DOES NOT have any duty to conduct independent inspections of the property or to independently verify the accuracy of any statement made by the seller in the disclosure/disclaimer statement.
Concluding Thoughts:
It is interesting, from an attorney’s perspective, that this Act abrogates (or overrules) any other civil remedy at common law. This means that common law claims of fraud cannot be brought if the RPCDA can provide a remedy to such claims. Further, the Disclosure act is dependent upon actual knowledge which is a higher burden to prove.
If you have questions or concerns regarding the Oklahoma Residential Property Disclosure Act, please give HH Legal a call at 828.851.2963. We will be happy to help you and determine if you need legal representation.