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FAQs on the Affidavit of Disclosure By K. Michelle Lind |
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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. Q: What land is subject to the Statute? A: The statutory requirements apply to all land sold in five or fewer parcels in unincorporated areas that are not located in a subdivision.Q: Does the Statute apply only to vacant land? 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. Note: This is for informational purposes only and is not intended as definitive legal advice. Transmission of this information is not intended to create, and receipt does not constitute, an attorney-client relationship. You should not act upon this information without seeking independent legal counsel. K. Michelle Lind, Esq. Michelle is general counsel to the Arizona Association of REALTORS® (“AAR”) and a State Bar of Arizona board certified real estate specialist. She serves as the primary legal advisor to the association, provides legal direction in the development of standard forms, is involved in legislative advocacy, and assists in the association’s educational efforts. Please note that 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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