Sellers Beware-New Virginia Disclaimer and Disclosure Statements Open The Door To Liability

Virginia released a new Disclosure/Disclaimer Statement July 1, 2007 affecting all home sellers in Loudoun County as well as the rest of Virginia. The new Virginia Disclaimer addresses the issue of zoning much more than previously. For example, let’s say you finished your basement, but did not get permits and/or a final inspection from the county. You may be liable for future issues that arise because of it even after the sale of the home. Furthermore, Virginia is eliminating the Disclaimer Statement and mandating a Disclosure Statement effective January 1, 2008, which will impact sellers even more.

To better explain how it will effect you as a seller or buyer, we contacted Michael McFarlane, attorney and owner of Highland Title and Escrow here in Northern Virginia. This is what he had to say regarding the issue:

"Recent changes in Virginia laws governing the sale of residential real estate will affect both buyers and sellers in the coming months. Virginia law has required the sellers of a one to four residential dwelling unit to provide a Disclosure Statement OR Disclaimer Statement.

The Disclosure Statement provides specific information regarding the condition of a dwelling to prospective purchasers.

The Disclaimer Statement advises prospective purchasers that the seller is not providing any information, and that the purchaser should proceed with caution and carefully inspect the property. In past years, almost all sellers provided a Disclaimer Statement and NOT a Disclosure Statement. The consensus among real estate agents (and sellers) was that the Disclosure Statement could subject their clients to undue liability.

The Virginia Real Estate Board (VREB) amended both statements for use after July 1, 2007. The changes to both the Disclosure Statement and the Disclaimer Statement reflect a requirement that purchasers be cautioned about possible zoning violations.

The biggest change, however, will occur on January 1, 2008 when the ability to use a Disclaimer Statement will be eliminated.

In 2008, all sellers must use a Disclosure Statement. This will dramatically change real estate transactions.

For instance, sellers will be required to disclose if there have been "any leaks or evidence of moisture" in the basement. With a Disclaimer Statement, a seller is not obligated to provide any information and is only governed by the laws of misrepresentation and fraud. If there is no affirmative representation regarding a dry basement or no action to conceal the leaks from the purchaser, the seller would not be liable to the purchaser if it is later discovered that substantial flooding occurs after every heavy rainfall.

If a seller states that there are no leaks or evidence of moisture on the Disclosure Statement, the seller could be held liable to the purchaser after settlement if this statement is discovered to be false.

With this new disclosure requirement, purchasers have the benefit of a full disclosure regarding the condition of the property they plan to buy. Sellers, however, may open themselves to liability for an innocent mistake on the Disclosure Statement and must be very careful."

As a seller, you are going to face much more liability in the road ahead and a simple mistake or "accidentally overlooking something" may cost you in the future. Not very good news for sellers.

But let’s see who may be happy about the new Disclaimer/Disclosure…

  • Buyers – may be more comfortable pruchasing a property because they may feel as though sellers are not able to "hide" anything for fear of a law suit. Buyers will also have more recourse than they currently do.
  • Home Inspectors – will be able to pitch "Pre-Listing Inspections" to sellers in order to find out what is or what could potentially be deficient with the property for Disclosure purposes and to help avoid future liability.
  • Lawyers – will love the new business.

Nevertheless, this "fuzzy feeling" of security that buyers will get may not be an all too realistic and buyers should still get a Home Inspection and take other measures to ensure that they cover themselves and their investment. And Home Inspectors may want to cover themselves and limit their liability should the sellers try to pin it back on them and their "Pre-Listing Inspection".

Whatever it may be, the new Virginia Disclaimer and future Disclosure Statement will have a big effect on the way real estate transactions are seen and conducted by all parties involved.

This article is not in any way a form of legal advice. Please contact a real estate lawyer or the VREB directly for clarification and guidance on this issue.

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