The Problem of Disclosure Part 2

The Problem of Disclosure Part 2
By Poelman & Langa, Attorneys

It was probably no coincidence that our comments last month were published next to Tracy Stice’s discussion of the same problem. [editor's note: Tracy Stice is a prominent real estate broker who writes a column for the FSBO newspaper.] The disclosure problem is a major and pressing problem for all of us. In his succinct and intelligent way, Mr. Stice raised the issue of the unknown defect that comes to light only after the buyer takes possession.

The example last month was hazardous chemicals. We have previously discussed the problem of legal boundaries that don’t fit the fence lines. Other problems include presence of human bones, ancient or otherwise. Hidden construction defects in the house on the property. The existence of structures built without county permits. And the astonishing case of the county ordinance that no one knew about that ostensibly makes it illegal to rent your property to short-term tenants. According to a recent newspaper article, the county only enforces it when a neighbor complains because there are so many thousands of violators! (sigh)

The possibilities are endless, and that is part of the problem. You can look for potential problems that you know might exist, but what do you do about problems of which no one has yet conceived?

The answer to that question that is being adopted by more and more sellers as time goes on is the sale that is specified to be “as-is”, meaning no warranties and no representations of any sort by the seller.

With some limitations the as-is approach works pretty well. One of those limitations is the federal law in the case of hazardous chemicals. Everyone who ever owned the property is at risk, regardless of their contracts, because of the draconian language in the federal statute. For that problem you need to be sure that there are no hazardous chemicals in the property, and, if you can, get an agreement from a financially sound buyer or seller to indemnify and defend you against any consequences of that law.

Lawyers argue at length about the implications of the Hawaii statute that requires sellers of real estate to make disclosures. True to its tradition the Hawaii legislature made an unholy mess of that statute and guaranteed that no one will really know what it means for some time yet. In the meantime, if you are selling your home as-is, there should be an express agreement that the Hawaii statute will not apply to the transaction, and waiving the provisions of the statute.