Disclosure Statement to Change on Jan. 1

Dear Forms Guy: One of my buddies told me that the Disclosure Statement is going to change again this coming January. I told him he was crazy. The Disclosure Statement just changed this past January. There’s no way it’s changing again this soon. Tell me it ain’t so. Sincerely, Joe

Dear Joe: It’s so. The Residential Property and Owners’ Association Disclosure Statement is changing effective Jan. 1, 2013. Sincerely, Forms Guy

Joe: What’s the story?

Forms Guy: In 2011, the General Assembly passed a law requiring the N.C. Real Estate Commission to change the Disclosure Statement to address certain information about any owners’ association regulating the property. New questions were added to the Disclosure Statement effective Jan. 1 of this year. When the Commission’s legal staff was in the process of adding the new questions, it concluded that the format of the Disclosure Statement has become unworkable. The main difficulty is with the two “lead­ins” to questions 1 through 12 and 13 through 20. The lead­ins are worded differently, you have to refer back to the relevant lead­in on every question, and it’s challenging when an individual question is added or amended to make the question “work” with the existing lead­ins. So, the Commission decided to scrap the format of the Disclosure Statement and create a new one.

Joe: What’s the new Disclosure Statement look like?

Forms Guy: The new Disclosure Statement has 37 self­contained questions. The lead­ins have been eliminated. Questions 1 thorough 31 apply to all properties and questions 32 through 37 apply to properties regulated by owners’ associations or which may be subject to restrictive covenants in the absence of an owners’ association.

Joe: Are there any new questions?

Forms Guy: A great deal of the wording of the questions in the new Disclosure Statement is identical or very similar to the wording of the questions in the existing Disclosure Statement. However, in addition to the new formatting, there are several additions or changes to the content, including the following:

The term “dwelling” has been defined. It refers to the dwelling unit or units to be conveyed with the property, and “dwelling unit” refers to “any structure intended for human habitation.”

The fact that the seller is only required to disclose information about which the seller has actual knowledge has been made clearer in instruction #2 and in the short paragraph immediately preceding question 1.

If the dwelling is serviced by a septic system, question 17 asks for the number of bedrooms allowed by the septic permit if records are available.

If a fuel source is stored in a tank, question 12 asks whether the tank is above or below ground and leased or owned.

Questions 10 and 11 ask for the age of the heating and cooling systems.

Question 1 asks for the year in which the dwelling was constructed rather than its age, and question 4 asks for the year in which the dwelling’s roof covering was installed rather than its age.

The list of possible materials comprising the dwelling’s exterior walls has been expanded in question 3.

“Shared well” has been added to the list of possible water supply sources in question 13.

“Polybutylene” has been added to the list of possible water pipe materials in question 14.

Garage door openers and gas logs have been added to the list of systems in question 19.

“Generator” has been added to the list of items comprising the electrical system in question 7.

Question 20 clarifies that the question about problems with appliances applies to appliances that may be included in the sale.

The question addressing “room additions or other struc­ tural changes” has been modified to address “structural additions or other structural or mechanical changes to the dwelling(s)” (question 23).

The question addressing violations of zoning ordinances, restrictive covenants, etc. has been modified so that it applies only if the seller has been notified by a governmental agency of such a violation (question 24).

Buried or covered debris has been added to the list of hazardous or toxic substances in question 25.

The term “federally­designated flood plain” has been changed to “federally­designated flood hazard area” in keeping with the term used by FEMA (question 29).

The “and” in the question asking whether the property is subject to regulation by an owners’ association and governing documents has been changed to an “or” to clarify that the question also addresses properties not regulated by an owners’ association but which are subject to restrictive covenants (question 32).

A new question 33 has been added that specifically asks for fees charged by an owners’ association or management company in connection with the transfer of the property.

Question 24 in the existing Disclosure Statement has been broken into separate two questions in the new Disclosure Statement so that judgments or pending suits involving the property and judgments or pending suits involving the planned community or owners’ association are addressed in different questions (questions 35 and 36).

If the seller answers “yes” to the question about whether “Recreational Amenity Maintenance” is paid for by the owners’ association, the seller must specify which amenities are covered (question 37).

Joe: Blimey! That seems like a lot of changes.

Forms Guy: Blimey? Are you British, Joe?

Joe: No, but I’m a big fan of Downton Abbey.

Forms Guy: I see. Back to the Disclosure Statement, most of the changes are pretty technical. Overall, I don’t think you’ll find that the new Disclosure Statement is all that different from the current Disclosure Statement. I also think you’ll find that the changes in the format and content of the new

Disclosure Statement are helpful and that the new Disclosure Statement is easier to use.

Joe: Will the owners of listings that are in place prior to Jan. 1, 2013, be required to complete and provide the new Disclosure Statement if they’ve already completed the existing Disclosure Statement?

Forms Guy: Good question, Joe. I’m happy to say that the answer is “no.” N.C. Real Estate Commission Rule 58A.0114(c) specifically provides that the new Disclosure Statement “applies to all properties placed on the market on or after Jan. 1, 2013.” Thus, if the property is placed on the market prior to Jan. 1, 2013, the seller would complete the existing Disclosure Statement and would not be required to fill out a new Disclosure Statement if the property is still on the market on or after Jan. 1.

Joe: What if the seller completes the existing Disclosure Statement before Jan. 1 and then something happens after Jan. 1 that would require the seller to correct it?

Forms Guy: Another good question, Joe. In such a case, if there is a need to correct the Disclosure Statement on or after Jan. 1, the seller would need to use the new Disclosure Statement to make the correction.

Joe: When can I get a copy of the new Disclosure Statement?

Forms Guy: The N.C. Real Estate Commission has indicated that the new Disclosure Statement will be available on the Commission’s website on or around December 1st. The new Disclosure Statement will also be available by Dec. 1 in the “Forms and Contracts” section of the NCAR website as form #140.

Joe: Can I start using the new Disclosure Statement prior to Jan. 1, 2013?

Forms Guy: No, Joe. You must use the current Disclosure Statement through the end of the year.

Joe: Okay, thanks Forms Guy.

Forms Guy: You’re welcome, Joe. Ta ta and tally ho!