May 9, 2000 The following is for study only and has NOT been approved by the Local Governmental Relations Committee, the Executive Committee or the Board of Directors.

Discussion

In 1989, C.A.R. supported legislation, AB 584 (Hauser), which amended the California Civil Code 1102.6 pertaining to the transfer disclosure statement. The amendments addressed controversies surrounding the disclosure of local conditions and implemented provisions to ensure uniformity in the process.

Issues arise when a new homeowner realizes, after moving into the home, conditions about the location of the home that were not apparent prior to purchase. For example, if a home is located adjacent to active farm land or timber harvesting land, issues pertaining to these activities, such as noise and dust from farming or lumber equipment, will not become apparent to the homeowner until after he/she moves in.

Obviously, such a discovery made after completion of the transaction and moving into the home is traumatic for a new homeowner. Upset homeowners will make nuisance complaints to local officials, who then face the difficult task of balancing conflicting rights and needs.  On the one hand, officials must take into consideration the complaints of new residents and the locality?s need for a healthy housing market. On the other hand, they must consider the rights of local property owners to continue with the viable use of their land which conforms to local land use laws, and which has historically contributed to the local economy.

In an effort to resolve this conflict, many localities pass ordinances declaring their intent to respect and preserve a certain activity that has long contributed to the economy of the locality. These usually come in the form of "right-to-farm"ordinances (since farming is the most common type of activity these ordinance are designed to protect), but they also affect other land uses, such as airports, golf courses and timber harvesting.

Once passed, these ordinances serve to declare to all new residents the intent of the locality to preserve a historic industry, but the matter of disclosure remains unsettled. To resolve this aspect of the problem, localities have passed ordinances requiring that such "right-to-farm" ordinances be disclosed to any home purchaser. Some cities have considered mandating that they be recorded. However, these solutions lead to other controversies, such as the proper procedure for disclosure and determining who has the responsibility for making the disclosure.

C.A.R. supported the amendments to Civil Code 1102.6 as a way to resolve these problems by introducing uniformity to the local disclosure process and by absolving realty agents of any disclosure responsibility. Civil Code 1102.6a states that if a city or county passes an ordinance on or after July 1, 1990, requiring a seller to disclose such locally designated items, the disclosure must be on a statutory, standard local option form and any addenda to this form provided by local ordinance. This law applies only to residential property containing one to four units. The form prescribed by the law also states that the disclosure is made by the seller and not by his/her agent.  Any local government passing an ordinance after July 1, 1990 to require a local option disclosure must use this form . The law allows different disclosure forms to be used if the ordinance was adopted priorto July 1, 1990. The law does not require that such disclosures be recorded.

Faced with a proposal for a local option disclosure, REALTORS® may object on the grounds that any additional disclosure requirement is unnecessary and may subject them to unwanted liability. On the other hand, localities usually consider such a proposal in response to an emerging controversy surrounding the desire of residents to be informed about certain local conditions about their property. Such a controversy left unaddressed also could leave realty agents vulnerable to liability over disclosure issues. The amendments that C.A.R. supported to Civil Code 1102.6 were designed to craft a workable solution to this dilemma, recognizing the concerns of local officials and residents along with those of real estate professionals. The disclosure statement as written in Civil Code 1102.6a provides the benefit of standardized language by requiring all localities to use the same form. It also affords real estate agents better protection against liability by specifically absolving them of any responsibility. Both provisions were seen as an alternative to leaving these issues open to interpretation.

One other issue that may arise in the consideration of a local disclosure ordinance is the question of trigger mechanisms. This concerns whether or not a local option disclosure should be required of all home transactions in the local jurisdiction or in only certain, specifically defined areas of the community. Here again, the issue revolves around whether REALTORS® feel more secure leaving certain conditions open to interpretation, or if they prefer to cover all possible scenarios by mandating the disclosure throughout the local jurisdiction. For example, the agricultural disclosures ordinances in Mendocino and Lake Counties require disclosure if a property is within 300 feet of land zoned agricultural. The Humboldt County right-to-farm ordinance applies only to land in unincorporated areas. On the other hand, the Tulare County right-to-farm ordinance applies to all land in the county, so as to making similar ordinances in the cities unnecessary. When Stanislaus County revisedits agricultural protection ordinance, REALTORS® did not support using a set distance as the trigger because they believed properties beyond certain distances also might be affected.

Below is alist of some cities and counties in California that have adopted local option disclosure ordinances and the issues they address. Local Option Disclosure Table