Real Estate Transfer Disclosure Statement: Which Transactions Are Exempt?
Determining which transactions are exempt from the Real Estate Transfer Disclosure Statement (TDS) requirements under California Civil Code §1102 is not always clear. For example, investors sometimes create limited liability companies (“LLC”) to sell residential property or use the LLC as the trustee of a trust, to get around the requirement of giving the buyer a TDS. However, this claimed exemption is doubtful.
The TDS is required in the sale of one to four residential units as well as transfers by exchange, installment land sale contract, lease with an option to purchase, option to purchase, or ground lease coupled with improvements.
The TDS is required in the sale of one to four residential units as well as transfers by exchange, installment land sale contract, lease with an option to purchase, option to purchase, or ground lease coupled with improvements.
The TDS is required in the sale of one to four residential units as well as transfers by exchange, installment land sale contract, lease with an option to purchase, option to purchase, or ground lease coupled with improvements.
Transfers of property that are exempt under Civil Code §1102 include new home sales requiring a public report, transfers pursuant to court order such as probate sales, transfers by foreclosure including deeds in lieu of foreclosure, and transfers by a fiduciary in the course of the administration of a decedent’s estate, guardianship, conservatorship, or trust. However, when the property is held in a revocable trust and the trustee is a natural person who is the sole trustee of the trust as well as the former owner of the property, or an occupant in possession of the property within the year preceding the transfer, the TDS is required.
The TDS is required in the sale of one to four residential units as well as transfers by exchange, installment land sale contract, lease with an option to purchase, option to purchase, or ground lease coupled with improvements.
Other exemptions from of the TDS include transfers from one co-owner to another, transfers made to a spouse or child, grandchild, parent, grandparent or other direct ancestor or descendent; transfers between spouses in connection with dissolution of marriage, and various transfers to the state for failure to pay property taxes and other circumstances.
The TDS is required in the sale of one to four residential units as well as transfers by exchange, installment land sale contract, lease with an option to purchase, option to purchase, or ground lease coupled with improvements.
The attempt to find a technical “loophole” to avoid providing the buyer with the TDS, and other disclosures, can places the seller and agent at risk of liability. The transfer disclosure law is intended to protect the buyer so they can be apprised of material issues that affect the property. To circumvent the law by using a LLC will likely be viewed skeptically by the courts. Moreover, besides the TDS statutory requirements, California court decisions as well as the purchase agreement itself require the seller to disclose material facts about the property.
The TDS is required in the sale of one to four residential units as well as transfers by exchange, installment land sale contract, lease with an option to purchase, option to purchase, or ground lease coupled with improvements.Unless there is a clear exemption from using the TDS, sellers, as well as the agents, should use the TDS and make a complete disclosure of all material facts about the property.
(This article was published in The San Diego Realtor, October 2009, and was updated in August 2020.)
This article provides general information and is not intended to provide advice on any specific matter. Attorney Robert Muir can be reached at muirlaw.com