Pursuant to A.R.S. § 33-422 (the "Statute"):
A seller of five or fewer parcels of land, other than subdivided land, in an unincorporated area of a county and any subsequent seller of such a parcel shall furnish a written affidavit of disclosure to the buyer, at least seven days before the transfer of the property and the buyer shall acknowledge receipt of the affidavit.
The buyer has the right to rescind the sales transaction for a period of five days after receipt of the Affidavit of Disclosure. The seller must record the executed Affidavit of Disclosure at the same time that the deed is recorded.
The push for this legislation began in approximately 1998. The counties lobbied for a state statute giving counties complete control over lot splits in unincorporated areas and reduce the allowable splits from five to three. Representative Gail Griffin of Sierra Vista was convinced that disclosure would be better than regulation.
In February 2000, Governor Hull called a special session to address growth management. Representative Griffin introduced a bill adding the Statute, which was attached to the Growing Smarter Plus legislative package. The Growing Smarter Plus legislative package was passed in the 4th special session. Therefore, the effective date of the Statute was May 18, 2000 as opposed to the July 18 effective date for legislation passed in the general session. Unfortunately, the information required by this first piece of legislation was ambiguous. Amendments to this legislation have been made almost every legislative season.
The following are some FAQs regarding the affidavit of disclosure law.
A: No. Although, much of the property in
unincorporated areas is vacant land, the Statute states that the
requirements apply to "land, other than subdivided land." The term
"land" is undefined. Additionally, the statute refers to the land as
"property" and "parcel." Therefore, the Statute applies to all land
(sold in five or fewer parcels, other than subdivided land) in an
unincorporated area, whether the land is improved, unimproved, vacant,
residential or commercial.
Q: What is an unincorporated area?
A: An unincorporated
area is land located outside the corporate limits of a city or town.
See A.R.S. § 9-101 et.seq.
Q: What is "subdivided land"?
A: Pursuant to A.R.S. § 32-2101(55) subdivided land means
"improved or unimproved land or lands divided or proposed to be
divided for the purpose of sale or lease, whether immediate or future,
into six or more lots, parcels or fractional interests."
Q: What kind of information must be disclosed in
the affidavit?
A:
The affidavit must contain information addressing
issues such as: legal access, physical access, road maintenance,
floods and floodplains, utilities and services, wells, septic systems,
percolation tests, zoning deficiencies, and other issues set forth in the statute..
Q: Is the form of affidavit required?
A: Yes. The required
form of affidavit is prescribed by the statute.
Q: Should the listing agent complete the affidavit
on the seller's behalf?
A: No. Like the
SPDS, the seller should complete the disclosure affidavit.
Q: What if the seller does not know some of the
required disclosure information?
A: The form of
affidavit does not allow for an "unknown" response to some of the
disclosure items. If the seller does not know and does not have access
to information required to be disclosed, the seller should indicate
that the information is unknown and provide any necessary explanation
on the explanation lines of the form. If additional space is required,
the seller should indicate that fact on the explanation line, write
the information on a separate sheet of paper (leaving a one-half inch
margin on all sides of the paper for recording purposes), mark the
paper as exhibit "B" (the legal description should be exhibit "A") and
attach the exhibit to the affidavit.
Q: Are foreclosures exempt from the Statute's
requirements?
A: Yes. For the
purposes of the Statute, "Seller" and "Subsequent Seller" do not
include a trustee of a deed of trust who is selling property by a
trustee's sale or any officer who is selling property by execution
sale to enforce a judgment or to foreclose a mortgage.
However, the subsequent sale of the property after the trustees sale or foreclosure is not exempt.
Q: Is a seller who is subject to the Statute
required to make any other disclosures?
A:
Yes. The Statute only requires the disclosure of
limited issues regarding the land. A seller is still required to
disclose all known material defects. Thus, the affidavit should be
used in conjunction with any other appropriate disclosure.
Q: What action must a buyer take to rescind a
transaction after receiving the affidavit?
A: The Statute simply provides that "the buyer has the
right to rescind the sales transaction for a period of five days after
the Affidavit of Disclosure is furnished to the buyer." Thus, no
specific procedure is required to rescind the transaction. Written
notice of rescission from the buyer to the seller during the five day
time period should be sufficient.
Q: What if the information disclosed in the
affidavit changes?
A:
A new affidavit may be recorded. The Statute
specifically provides that a subsequently recorded affidavit
supersedes any previous affidavit.
Q: How will the Statute be enforced?
A:
The Statute contains no enforcement mechanism or
penalty. However, a seller could have civil liability to the buyer for
the failure to furnish the affidavit of disclosure.
Q: Does a real estate salesperson or broker have
any potential liability if the seller fails to furnish the Affidavit of
Disclosure to the buyer?
A: Depending on
the circumstances, the failure to inform the buyer or seller of the
Statute could constitute a breach of duty. Thus, if the listing broker
failed to inform the seller of the statutory requirements, which
resulted in damages to the seller, the listing broker could be held
liable for those damages. Similarly, if the buyer's broker failed to
inform the buyer of the statutory requirements, which resulted in
damages to the buyer, the buyer's broker could be held liable for
those damages.
