Northern Arizona’s Wildfires and Floods Raise Contract Questions Part 2

Posted on August 27, 2010 by Michelle Lind, Esq

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Part Two of Two | View Part One

Q:  Is a seller of a property located in an area that has been affected by a fire and flood required to disclose that information on the Seller Property Disclosure Statement (“SPDS”)?

A:  Where a seller of real property knows of facts materially affecting the value of the property that are not readily observable and are not known to the buyer, the seller is under a duty to disclose those facts to the buyer, Hill v Jones, 151 Ariz. 725 P.2d 1115 (App.1986).  Additionally, pursuant to the AAR Residential Resale Purchase Contract (“Contract”),  the seller is obligated to disclosure all known material latent defects that materially and adversely affect the consideration to be paid by the buyer, See, Section 5b, Lines 169-175.  The SPDS form addresses fire, flood and drainage at lines 72-72, 170-176 and 204-209.  Any additional explanations may be included on the SPDS at lines 235-237.

Q:  If the seller issues an updated SPDS after the inspection period disclosing fire or flood conditions affecting the property, can a buyer cancel the contract?

A:  Pursuant to the Contract at Section 4e, lines 159-162, Changes During Escrow:  “Seller shall immediately notify buyer of any changes in the Premises or disclosures made herein, in the SPDS, or otherwise.  Such notice shall be considered an update of the SPDS.  Unless Seller is already obligated by

Section 5a or otherwise by this Contract or any amendments hereto, to correct or repair the changed items disclosed, Buyer shall be allowed five (5) days after delivery of such notice to provide notice of disapproval to seller.”  Pursuant to the Contract at Section 6j, the buyer is entitled to elect to cancel the contract with the notice of disapproval.

Q:  If the property damage loss is less than ten percent (10%), however, the seller cannot complete the repairs prior to close of escrow (COE), is the buyer entitled to cancel the contract?

A:  Pursuant to the Contract, the seller “warrants that . . . at the earlier of possession or close of escrow, the Premises will be in substantially the same condition as on the date of Contract acceptance” (see
Section 5a, lines 163-168).  If the seller is unable to complete the repairs necessary to bring the property into substantially the same condition as on the date of contract acceptance by COE and the buyer is not willing to extend COE, the buyer is entitled to deliver a Cure Notice pursuant to Section 7a, lines 271-274.  If the seller fails to cure the potential breach, within three days after delivery of the notice, the failure to comply shall become a breach of contract, and the buyer may cancel pursuant to Section 7b.

Q:  If the property a tenant is leasing sustains damage, is the landlord obligated to make repairs?

A:  As stated in the Residential Lease Agreement at lines 127-144: “Tenant shall immediately notify Landlord if any situation or occurrence that requires the Landlord to take action as required by the ARLTA” (Arizona Residential Landlord Tenant Act).  “Landlord agrees to maintain the Premises as provided in the ARLTA… and make all repairs necessary to keep the Premises in a fit and habitable condition…”  The ARLTA at A.R.S. § 33-1324 requires the landlord to comply with the requirements of applicable building codes materially affecting health and safety and make all repairs and do whatever is necessary to put and keep the premises in a fit and habitable condition.

Q:  Who is responsible for repair or replacement of a tenant’s personal property if damaged during a fire or flood?

A:  The Residential Lease Agreement, at lines 193-195, states:  “Tenant assumes all liability for personal injury, property damage or loss, and insurable risks.  Landlord strongly recommends that Tenant obtain and keep renters insurance in full force and effect during the full term of this Agreement.”

Q: Who should the parties contact for information and assistance?

Coconino County Flood Information & Assistance http://www.coconino.az.gov/information.aspx?id=23077

Ready Coconino Brochures and Emergency Preparedness Information http://www.readycoconio.az.gov/


This article is of a general nature and may not be updated or revised for accuracy as statutory or case law changes following the date of first publication. Further, this article reflects only the opinion of the author, is not intended as definitive legal advice and you should not act upon it without seeking independent legal counsel. 

Michelle Lind

Bio:

AAR Chief Executive Officer Michelle Lind is a State Bar of Arizona board-certified real estate specialist and the author of Arizona Real Estate: A Professional’s Guide to Law & Practice. This article is of a general nature and may not be updated or revised for accuracy as statutory or case law changes following the date of first publication. Further, this article reflects only the opinion of the author, is not intended as definitive legal advice, and you should not act upon it without seeking independent legal counsel.

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