What is The Property Disclosure Statement and Why is it Important
The Property Disclosure Statement (PDS) is a form that is usually provided by the seller to the buyer PRIOR to writing an offer.
Important to both Buyer and Seller, a Property Disclosure Statement (or PDS) is meant, in part, to protect the Seller. By completing the PDS form (residential, strata and rural land), a Seller is able to disclose (in writing) all relevant facts about the property.
There’s so much to know when you’re looking to purchase real estate. You, or your Realtor, will gather information through the MLS, the municipality, and a home inspector, but so much about a property ultimately lies in the hands of the Seller. For example, upon viewing a property in August, you’d be hard-pressed to know that same home floods every February.
Here’s everything you should know about the Property Disclosure Statement in BC.
What Kind of Disclosures Are Made in a Property Disclosure Statement?
As there are different forms used based on whether the subject property is strata, residential, or rural - they cover similar kinds of disclosures.
The disclosure section of a PDS is roughly three-pages in length so it’s fairly comprehensive.
The PDS divided into five sections - land, services, building, general, and then a written section dedicated to latent defects. Two types of defects exist - those that are patent (evident upon a reasonable inspection), and latent (those not evident upon a reasonable inspection).
Along with yes or no disclosures like, “Are you aware of problems with the plumbing?” and, “To the best of your knowledge, are the exterior walls insulated?”... latent defects require a written explanation to be disclosed prior to making an offer.
As a general rule of thumb, struggling with whether or not to disclose something probably means it’s best you disclose it.
Is the Property Disclosure Included in a Real Estate Contract?
Not necessarily, no.
As a Buyer, it’s crucial your Realtor incorporates the PDS into the contract. Doing so ensures the Seller is liable for the answers provided by the PDS.
What Happens When a Property Disclosure Statement is Crossed Out?
It’s not too uncommon to come across a PDS that’s been crossed out.
Essentially a Seller crossing out a PDS means the seller has no real knowledge of the property and the Buyer needs to do their own due-diligence.
In cases where Seller’s never live in the property - like investment properties that have always been tenanted, there’s much about the property they may not know.
While it doesn't necessarily mean you should run from a property with a crossed-out PDS, it’ll certainly be even more important to uncover relevant facts about the property.
Should a Buyer Rely Entirely on a Property Disclosure Statement?
No. Even the Property Disclosure Statement itself includes a clause reminding Buyers of the importance of making their own inquiries. It’s important to remember that a Seller’s recollection or knowledge of their own property might be incomplete.
For defects listed within the PDS, a Buyer may consider hiring an inspector or contractor to estimate the impact and/or cost of rectifying any listed defects. Making inquiries with the municipality will help verify the existence of necessary building permits and other information relevant to the property.
Is There Only One Type of Property Disclosure Form?
No. While disclosure statements issued by the BC Real Estate Association (BCREA) are somewhat similar - there are three different forms depending on the type of property. They are:
New Construction & Developer Disclosure Statements in BC
In keeping with REDMA (the Real Estate Development Marketing Act), even Developers have to disclose everything relevant to their developments. Where residential PDSs are a few pages in length, larger developments often see PDSs that are hundreds of pages in length with amendments filed during the course of construction.
With disclosures filed with the Superintendent of Real Estate, developers are required to disclose information (without misrepresentation) regarding the strata, title and legal matters, construction and warranties, approvals and finances, and more. Before writing an offer on a condo in a new development, the Buyer must receive (and be afforded the time) to review the Developer’s Disclosure Statement.
The Potential Risk of a Property Disclosure Statement
It’s possible a person selling a condo makes an unintentional erroneous disclosure on a PDS found to be untrue following completion. For example, a Seller might note the age of the roof, only to learn they were wrong when the Buyer speaks to the roofing company years later. Though unintentional, the PDS might act as a form of a warranty for the Buyer.
Conversely, the Buyer’s reliance on the PDS is risky as many of the disclosure questions ask, “Are you aware…?”, where a Seller could claim they’re not aware.
To navigate disclosure statements as a Buyer or a Seller, I’d be happy to help. Contact me today for a no-obligation consultation.