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.

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

THEY CALL THEM PRH-ISMS.

Beliefs that define every home Justin Goff and the Pacific Ridge Homes (PRH) team build. Words like Honesty, Quality, and Commitment, principles that have turned a small family-owned construction company into the largest locally owned and operated homebuilder in Snohomish County. The PRH-isms go on, as does Pacific Ridge, through economic instability and a reignited Millennial-driven market, into an uncertain future where limited inventory threatens.

All in all, it's just another day in the Puget Sound area residential housing industry.

"It's not easy," says Goff, co-owner at PRH, referring to the building industry and its challenges, "and it's never black and white." Planners see things differently, the market fluctuates, and new rules provide ever-increasing challenges.

There's also an already diminishing land supply problem.

Lynn Eshleman, manager of land acquisition and development and director of government affairs at PRH, grapples with a host of challenges, not the least of which is simply finding land where people want to live. "We have to work around more pre-existing neighborhoods and that can mean neighbors opposed to new growth," she adds.

SO WHY KEEP DOING IT?

For Goff, it comes from a longtime love affair of building things, great things people can call home and start families in. He occasionally drives through communities built by his 23-person team, just taking it all in. Seeing one of their finished homes, condos, or townhomes become part of a community is always a fulfilling moment for him, a rare constant in the 15 years since PRH was founded. And though fulfillment doesn't pay the bills, it remains a driving force behind the company's original commitment to provide residents with a great place to come home to at the end of the day.

The past 15 years have been a boon for the former "secondary" housing markets, with sparse land and skyrocketing rents residing within city limits. Areas like South Everett, Lake Stevens, Marysville, and Mill Creek have become hot spots where commutes aren't too excessive, prices remain reasonable, and schools grade well. It's also where PRH homes line the streets.

So far, 2015 has been a banner year for PRH. "We can't build fast enough," states Goff, who has built 75 residences in just the past three months, with some 200 homes and 50 townhouses planned by year-end. This may seem rosy, however take a drive through Kirkland or Redmond for a look at the latest in "Northwest contemporary" architecture, where open floorplans and trendy distressed wood accents rule the roost. As always, buyers dictate the market, and their contemporary taste doesn't come cheap. The latest design elements can add $5,000 to $10,000 to a new home and it's up to Goff and co. to ensure that the trendsetters can afford the final product. Builders like PRH have countered rising costs by going higher density, forsaking once-treasured assets like big grassy yards for more compact lots designed to pack a higher quality punch. New homeowners, like builders, are learning to do more with less.

As always, there is a balancing act between building homes that people love, keeping them affordable, and remaining in business while doing so. And Goff credits the MBA for its part in forming a common voice that protects the homebuilders' well-being in regard to various governmental issues and giving builders the freedom to build, as opposed to manning the front lines of legislative affairs. It's this unified voice that jurisdictions listen to, which in turn allows builders to focus on creating the best products for current and future generations.

In terms of what he can control himself, Goff is quick to adapt in the face of constant change, keeping PRH consistent both in terms of value and quality, two pillars of the industry. He knows that "one bad thing trumps one hundred good things," when putting together the puzzle pieces that make the perfect home, which means that a working cohesion between all facets of the building process is a must, both in-house and out. He's also not afraid to think outside the box, promoting creativity within his expanding crew while working closely with each unique homeowner to ensure sustained happiness.

And so, with core values solidifying their foundation, PRH continues to build upon their simple yet effective blueprint for success. PRH continues to be, in the words of Eshleman, a team that "fosters respect (for) each other's opinions and ideas," which in turn cultivates innovation and ‘buildability' within the community and industry.

And hey, there's another PRH-ism.

Ed. note: Pacific Ridge Homes lives on today as a division of D.R. Horton.

This week, Shannon and MBAKS President Mike Walsh take a break from building a wheelchair ramp to talk about the importance of Rampathon.

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