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Court Requires Transfer Disclosure Statement on Mixed-Used Property Where A Residence Exists

In Richman v. Hartley, a California appellate court recently held that a Transfer Disclosure Statement is needed on a mixed-use property containing both residential and commercial structures. In Richman, defendant Hartley made an offer to purchase the Richmans’ real property in Ventura, California. The property was a single parcel improved with a commercial building and a residential duplex. Richman did not provide Hartley with a Transfer Disclosure Statement. The parties signed a non-standard Purchase and Sale Agreement, but Richman (the seller) was required to provide all appropriate disclosures to Hartley. The Agreement contained an as-is provision. The Agreement also stated that it was not contingent upon any inspections or any other conditions. The buyer failed to close escrow and the seller sued the buyer.

The buyer defended the lawsuit by claiming that it was a condition precedent to purchasing the property that he receive a Transfer Disclosure Statement (“TDS”). The seller responded by arguing that a TDS was not required because of the as-is provision and that the property was commercial. The buyer filed a motion for summary judgment asking the court to dismiss the case on the ground that a TDS was required before he was required to close escrow. The trial court found in favor of the buyer. The seller appealed and the appellate court affirmed the judgment.

The appellate court held that the TDS is required on any property containing one to four unit residential structures. Therefore, it is irrelevant that the property had a commercial building. The TDS was required as a residential duplex existed. The court also noted that a TDS may not be waived in an as-is sale.

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