Resale Certificates – What to Disclose

Sometimes our clients ask us: what are the legal requirements for language used in resale certificates regarding damages where repairs are needed?

Our basic recommendation is that it is always better to disclose something and have a sale fall through than to risk a lawsuit against the property manager and/or the association for failure to disclose known damage in the resale certificate.

RCW 64.34.425 requires the resale certificate to contain a statement of any anticipated repairs which will cost more than 5% of the association’s annual budget and a statement about any violations of the building code in the unit or the condominium as a whole. We recommend that associations/managers disclose general information about damage/repairs in the resale certificate and make inspection reports available for review if they exist.

For instance, say an association had an engineer perform an inspection on a building and the engineer found problems with the stucco siding and created a report that states his findings. The resale certificate could just say that a preliminary investigation was done by an engineer and the inspection revealed that there are areas of concern about the exterior envelope of the building, some of which may be violations of the building code, and that a copy of the report is available at the attorney’s or property manager’s office. That way you have disclosed the problem without having to categorize it as a big problem or a small problem, and if anyone wants to know the extent of it they can go review the report.

If an association is further down the pike – in litigation or repairing the building after litigation – then the resale certificate should disclose more about the status of the lawsuit, scope of repair, cost estimates, repairs already done or being undertaken, etc. This will obviously reveal more about the severity of the damage and repairs, but full disclosure is important to avoid liability for the association and the property manager.

If you have any questions we can answer, please feel free to leave a comment or contact us directly. We look forward to continuing this conversation with you in our future posts!