In previous articles we have alluded to the Hawaii Mandatory Disclosures law, and the potential problems it poses for sellers. The statute is Chapter 508D of Hawaii Revised Statutes. It was enacted in 1944 and applies to sales of residential property only. That much is clear and certain, but as it usually does, the legislature produced a can of worms full of ambiguities and uncertainties.
The “disclosure statement” is required by the statute to be delivered to the purchaser before not later than 10 days after the sale contract is signed, after which the purchaser has 15 days to review it and decide whether to cancel out of the deal. The law appears to give the purchaser an unfettered right to cancel during the 15-day period.
What is the “disclosure statement”. Well, the statute does define it, sort of. It says a “disclosure statement” is a written statement that “purports to fully and accurately disclose all material facts” relating to the property that are 1. “within the knowledge or control” of the seller, 2. “disclosed” by recorded documents, or 3. “can be observed from visible, accessible areas”. Spend a half hour parsing that definition and you might have a rough idea of what the statute requires in the disclosure statement, but just to confuse the issue a bit further, the statute goes on to say, “The disclosure statement shall not be construed as a substitute for any expert inspection, professional advice, or warranty”.
The statute exempts some transactions from the disclosure requirements. These are mainly sales between co-owners, family members, foreclosure sales, bankruptcy sales, partitions, settlements of legal disputes and others, some obvious, some inexplicable.
Some facts are not to be included in the disclosure statement. For instance, the disclosure statement may omit the fact that an occupant of the property “was afflicted with acquired immune deficiency syndrome”, or the fact that the property was the site of an “an act or occurrence that had no effect on the physical structure or the physical environment” of the property.
We are left wondering what facts are required to be in the statement, and what is a “material fact”. There is a definition in the statute that doesn’t help much. It says a material fact is “any fact, defect, or condition, past or present, which materially affects the value” of the property. In other words, a material fact is a fact that is material. Big help.
In our next articles we will discuss some of the other problems with the statute, and some recommendations for avoiding them.
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