A home is more than bricks and sticks. Under the law and project documents summarized below, a complex bundle of rights and obligations are imposed upon the buyer and builder.

Why is disclosure a buyer’s best friend? The best consumer protection the law can provide is ensuring an opportunity to acquire an understanding of the products being purchased. This is difficult to achieve, however, because of the complex bundle of rights and obligations being obtained.¹

A builder wants a buyer to buy—but only what the builder is selling; not what a buyer mistakenly hopes or believes is being sold. To avoid post-closing disputes, a builder needs clear guidance to describe what is being sold (the complex bundle of rights and obligations).

The Washington Condominium Act (WCA, RCW 54.34, for condominiums) and Land Development Act (LDA, RCW 58.19, for subdivisions) require a Public Offering Statement (POS) containing mandatory specific information. The objectives fostered by this approach include: providing guidance for POS contents; promoting clear and concise POS’s; encouraging buyers to read and understand; avoiding irrelevant, ambiguous, and confusing disclosures; avoiding a false sense of security that lengthy POS’s contain all relevant information; promoting uniform POS’s; facilitating project comparison; enabling POS preparation at reasonable cost; facilitating obtaining legal opinions; and decreasing the need for state agency review. The WCA-POS is mandatory. The LDA-POS is often not required because of various exemptions (e.g., lot is improved with, or builder is under contract to build, a house). But, an LDA-POS may be given voluntarily. ^{1, 2}

The WCA/LDA disclosures involve three components: cautions to buyers, topics covered, and documents delivered. To avoid post-closing disputes, WCA/LDA POS’s provide the following cautions: buyer has a cancellation period; buyer may only rely on seller representations and express warranties contained in the POS or a writing signed by seller; buyer may not rely upon agent’s promises; POS is only a summary of some significant aspects of the home; documents are complex, contain other important information and create binding obligations; and buyer should seek legal counsel assistance. ²

The topics covered by the POS include: community name and address; developer and management company name, address and relationship; nature of interest being purchased; permitted and restricted uses; number of homes; principal amenities; limited common areas; land the owners and others may access; construction status; association and owner maintenance; owner's assessments; other dwelling fees; governmental assessments; blanket encumbrances; developer’s rights; model homes; association liens; physical hazards; construction warranties; building code violations; association litigation; association insurance; documents delivered; insulation data; and Form 17 environmental disclosures. ²

The documents delivered with the POS include: public offering statement; declaration; plat/survey map; HOA articles; HOA bylaws; HOA rules; HOA balance sheet; HOA annual budget; and construction warranty. ²

The Form 17 Seller Disclosure Statement (provided for under RCW 64.06) creates problems for sellers— the questions are subjective, subject to multiple interpretations, provide grounds for litigation, and are not well designed for builder project sales. Buyers may waive, and builders need not provide, a Form 17. Builders should give either a WCA or LDA POS in lieu of a Form 17—builders are not avoiding disclosures, but are providing disclosures more appropriate for project sales. However, the builder must provide in the POS the Form 17, Section 7 Environmental Disclosures if any question would be answered YES. ³

A single Disclosure Book, with Acknowledgement Addendum, should be used, and contains: POS and documents; delivered when PSA signed; makes disclosures a part of buyer’s contract; avoids document delivery hassles; assures that buyer gets disclosures; and makes proof of delivery easier.

The builder’s Addendum to the Purchase and Sale Agreement should provide for buyer’s waiver of the Form 17 and acceptance of the builder’s alternative Disclosure Book.

 

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Endnotes: ¹ WCA Comments; ² RCW 64.34.400, 405 & 410 and 58.19.030, 045 & 055; ³ RCW 64.06.

Author: James C. (Pete) Middlebrooks, owner of the Law Office of James C. Middlebrooks, provides comprehensive services to individual, corporate, and institutional clients on residential and commercial real estate development, land use, acquisition, investment, and financing.

423.252.2693  |  pete@jcmiddlebrooks.com

By Noah Haglund, The Everett Herald

Everett, Wash.—A united Snohomish County Council passed a budget Monday that staves off most public safety cuts with help from a modest property tax increase.

The spending plan for 2017 followed the contours that council Chairman Terry Ryan had recommended a week earlier. Ryan's budget, in turn, hewed closely to a $238 million plan that Executive Dave Somers unveiled in September, though the council softened cuts to key sheriff's office programs.

Read article

Number of the Day: 12.4

As in, Seattle metro area median home prices are up 12.4 percent from last year, topping Zillow's list of fastest appreciating U.S. markets.

In the everlasting battle between West Coast cities boasting the most eye-popping home prices, Seattle seems to have landed a surprise left uppercut to its sister (cousin?) to the south, the n-o-t-o-r-i-o-u-s San Francisco.

San Fran (they hate being called that) still holds the edge in median home values, with the average Bay Area home running just over $865,000, compared to $455,000 in the Seattle metro area, which includes Everett, Bellevue, and Tacoma.

Despite the still rather large gap in median prices, our region's $455,000 is up 12.4 percent from last year, which is good enough to top Zillow's list of fastest-appreciating markets. U.S. home values rose 6.9 percent during the same period, while San Francisco has thus far seen a 6 percent increase, or half of what Seattle is experiencing.

Still, don't expect the median price gap to close anytime soon. San Francisco had hit our current median home value way back in July 2002 and they haven't looked back since.

Is this a sign of where we're headed? MBAKS and friends recently addressed this issue at our annual Housing Summit, held October 17. At the Summit, the association announced our 2018 legislative agenda, including a 10-Point Plan for Housing Attainability.

Curious about the rental market? Seattle tops that list too, with a 5.5 percent increase year over year, which comes out to a median monthly rent of $2,189. U.S. rents are up 2.1 percent (at $1,430 a month), and San Francisco again limbos under the trend at a scant 0.4 percent increase, though don't start putting flowers in your hair just yet—their median rent is still a bloated $3,376 per month.

I guess that's one thing to be thankful for this Northwest Thanksgiving—at least we're not San Francisco… yet.