Disclosures When Selling an Apartment Building
California law requires sellers of apartment buildings to make a variety of disclosures to buyers. Most of these disclosure rules apply to residential real property. Commercial real estate, those with 5 or more units are not necessarily subject to as many rules for disclosure as residential 4 or less units. Never the less commercial apartment buildings are subject to disclosure requirements, including known defects or hazards, particularly environmental hazards. California also requires disclosure of certain earthquake risks.
Common Law Disclosure Requirements
Sellers of commercial property have a duty to disclose any facts known to them that “materially affect the value or desirability of the property.” Failure to do so with the intention of inducing someone to purchase a property can result in civil liability for fraud.
Statutory Disclosure Requirements
Sellers of commercial real estate must make certain environmental and health-related disclosures, such as asbestos or other hazardous substances on the property. Federal law already requires disclosure of lead paint in structures built prior to 1978.
If a seller of commercial real estate is not a resident of California, they must disclose this to state tax authorities. If they are not located in the U.S., they must disclose this to the IRS.
A law requiring commercial property sellers to make detailed disclosures regarding energy usage was repealed in 2015, and replaced with a law requiring utility companies to make those disclosures.
Earthquake Disclosures –If a property has a water heater installed, sellers must certify that they have complied with state laws regarding proper anchoring of the unit to prevent earthquake damage.
A seller must disclose whether the property is located in one of several hazard areas, including a “special flood hazard area,” “potential flood area,” “very high fire hazard severity zone,” “earthquake fault zone,” “seismic hazard zone).
Other statutory disclosures include Environmental hazards and seller must provide delivery of a DRE booklet regarding hazardous substances including Asbestos , Disclosure if the seller is a foreign person , Delivery of earthquake guide for commercial property , Property’s location within airport influence , building energy use and consumption information and much more.
A qualified commercial real estate agent specializes in knowing all the requirements needed to sell your apartment building.