Property Disclosure Statement Guide: What Landlords, Tenants, and Investors Need to Know
Learn everything about property disclosure statements, including legal requirements for sellers, what tenants should know when their rental is being sold, and how investors can protect themselves during transactions.
Introduction
A Property Disclosure Statement is a legally significant document that requires property sellers to reveal known material defects and issues with a property. Whether you're a tenant whose rental home is being sold, a landlord selling your rental property, or a real estate investor managing multiple properties, understanding disclosure requirements is crucial to protect your interests and avoid potential legal disputes. This guide explains what property disclosure statements entail, who needs to complete them, what must be disclosed, and how these documents affect different parties in real estate transactions.
Key Things to Know
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Property disclosure requirements vary by state, so always check your local laws or consult with a real estate attorney to understand specific obligations in your area.
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Disclosure statements typically cover known issues only—sellers generally aren't required to hire inspectors to discover unknown problems.
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For landlords selling rental properties, tenant-reported maintenance issues should be included in your disclosures, even if you haven't personally verified them.
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Tenants' lease rights are generally protected when a rental property is sold; the new owner typically must honor existing lease terms.
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Real estate investors should maintain detailed property records and consider pre-listing inspections to facilitate accurate disclosures.
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Selling a property 'as-is' does not exempt sellers from disclosure requirements—you must still disclose known material defects.
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The consequences of inadequate disclosure can include lawsuits, monetary damages, rescission of the sale, and significant legal expenses.
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When in doubt about whether to disclose something, the safer legal approach is to include it in your disclosure statement.
Key Decisions
Property Disclosure Statement Requirements
Include the complete property address and legal description as it appears on the deed or title documents to properly identify the subject property.
List all current owners/sellers of the property, including how title is held (individual, joint tenants, tenants in common, trust, etc.).
Specify the property type (single-family, multi-family, condominium, commercial, etc.) as this affects disclosure requirements.
Hawaii Requirements for Property Disclosure Statement
Requires sellers to disclose all material facts about the property, including any defects that could affect its value or desirability. This is the primary state law governing property disclosures in Hawaii.
Mandates that the disclosure statement must be delivered to the buyer no later than ten calendar days after the acceptance of a real estate purchase contract.
Requires disclosure of all material facts concerning the property that are within the knowledge or control of the seller, including conditions affecting the property or defects in major components.
Requires disclosure of whether the property is located in a special flood hazard area as designated by the Federal Emergency Management Agency.
Requires disclosure of known lead-based paint hazards in housing built before 1978, providing buyers with a 10-day period to conduct a risk assessment or inspection for lead-based paint hazards.
Requires specific disclosures for properties that are leasehold rather than fee simple, including terms of the lease, rent renegotiation provisions, and expiration dates.
Requires disclosure of any planned community association that the property is subject to, including any mandatory fees, assessments, or restrictions.
Requires specific disclosures for properties subject to a condominium property regime, including association documents, bylaws, and financial information.
Requires disclosure that information about registered sex offenders is available to the public via the Hawaii Criminal Justice Data Center website.
Requires disclosure if the property is within one mile of a military training area, which may subject the property to noise, dust, smoke, or other impacts.
Requires disclosure if the property is within a noise exposure area as determined by the State Department of Transportation, which may subject the property to aircraft noise.
Requires disclosure if the property was used for methamphetamine production, unless the property has been properly remediated according to state standards.
Requires disclosure of any burial site on the property that the seller has knowledge of, as defined under chapter 6E.
Requires disclosure of special management areas, shoreline setback requirements, and coastal erosion hazards for properties near the ocean.
Requires disclosure if the property is located in a lava zone, particularly on the Big Island, which may affect insurance availability and rates.
While not specifically required by Hawaii law, federal guidelines recommend disclosure of known radon hazards as part of general material fact disclosure.
Requires disclosure of known mold issues as part of material facts that could affect the value or desirability of the property.
Requires disclosure of known asbestos-containing materials in the property as part of material facts disclosure.
Common practice in Hawaii to disclose termite inspection reports and any history of termite treatment or damage, particularly important due to Hawaii's tropical climate.
Provides buyers with the right to rescind the purchase contract within 15 calendar days of receipt of the disclosure statement if it was not provided before the acceptance of the offer.
Frequently Asked Questions
A Property Disclosure Statement is a document in which the seller of a property discloses known material defects, issues, or problems with the property. These typically cover structural issues, water damage, pest infestations, environmental hazards, boundary disputes, and other conditions that might affect the property's value or desirability. The form varies by state but generally requires honest disclosure of problems the seller is aware of, rather than requiring the seller to investigate unknown issues.
As a landlord selling your rental property, you must disclose all known material defects, regardless of whether they're visible during an inspection. This typically includes structural issues, water damage, electrical or plumbing problems, environmental hazards (like lead paint, asbestos, or radon), past flooding or water intrusion, boundary disputes, and any major repairs performed. You should also disclose information about the current tenancy, including lease terms, security deposits held, and any ongoing tenant disputes. Failure to disclose known issues can result in legal liability, including potential lawsuits for fraud, misrepresentation, or breach of contract.
If you're a tenant in a property being sold, your rights generally remain protected under your existing lease. The new owner typically must honor the terms of your current lease until it expires. During the sale process, you may experience showings and inspections, but you should receive proper notice according to state law. While you're not responsible for completing the disclosure statement, be aware that the landlord may need to disclose information about your tenancy to potential buyers. If you've reported maintenance issues that haven't been addressed, these should appear on the disclosure statement. Consider documenting the condition of the property and any unresolved maintenance requests to protect yourself from potential disputes with the new owner.
As an investor with multiple properties, establish a systematic approach to property disclosures. Maintain detailed records for each property, including maintenance histories, repairs, known issues, and tenant communications about problems. Consider conducting pre-listing inspections to identify potential issues before completing disclosure forms. Be particularly thorough with properties you don't personally occupy, as courts may have less sympathy for investor-sellers who claim ignorance of property conditions. When purchasing properties, carefully review sellers' disclosures and consider hiring specialized inspectors for older properties or those with potential environmental concerns. Remember that disclosure requirements apply equally to investors and individual homeowners.
Failing to disclose a known material defect can have serious legal and financial consequences. The buyer could sue for fraudulent misrepresentation, fraudulent concealment, or breach of contract. Potential remedies available to the buyer might include rescission of the sale (canceling the transaction), monetary damages to cover repair costs, or compensation for diminished property value. In some cases, you might also face punitive damages, especially if the court determines the omission was intentional. Even if you win such a lawsuit, you'll likely incur significant legal fees and damage to your reputation. The best practice is always full and honest disclosure of all known issues.
Yes, disclosure requirements vary by state, and certain transactions may be exempt. Common exemptions include transfers between family members, court-ordered transfers (such as in divorce or foreclosure), transfers to or from government entities, and some estate sales. Some states also have exemptions for new construction. However, even when technically exempt, providing disclosures is often advisable to prevent future disputes. Real estate investors should note that in most states, being a non-occupant owner does not exempt you from disclosure requirements. Always consult with a real estate attorney familiar with local laws to understand your specific obligations.
Selling a property 'as-is' means the seller won't make repairs or provide credits for issues discovered during inspections. However, this does NOT exempt the seller from disclosure requirements. Even in as-is sales, sellers must still disclose known material defects. The 'as-is' clause protects against repair requests but not against fraud or misrepresentation claims for undisclosed known issues. For landlords and investors, an as-is sale can be useful for properties needing work, but you must still complete disclosure forms honestly and completely.
When selling a rental property, err on the side of over-disclosure rather than under-disclosure. Include all known issues, even if they seem minor or have been partially repaired. Be specific about when problems occurred, what repairs were made, and by whom. For example, instead of simply noting 'past water damage,' specify 'basement flooding in 2019, professional remediation completed, no recurrence since installation of sump pump.' Also disclose tenant-reported issues, even if you haven't personally verified them. Include information about the current tenancy, including lease terms, rent amount, security deposits held, and any ongoing disputes. Thorough disclosures protect you legally and can actually facilitate smoother transactions by preventing surprises later in the process.
While disclosure statements are primarily intended for potential buyers, as a tenant, you can request to see the disclosure statement from your landlord, though they're not legally obligated to share it with you in most jurisdictions. Reviewing the disclosure can give you insight into known issues with the property and verify that problems you've reported are being properly disclosed. If you notice that significant issues you've reported are missing from the disclosure, you might consider documenting this discrepancy to protect yourself. Remember that your lease rights continue regardless of the property sale, and the new owner will generally be bound by the terms of your existing lease.
If you discover an undisclosed issue after purchasing a rental property, first document the problem thoroughly with photos, videos, and professional assessments. Determine when the issue likely originated to establish whether the seller should have known about it. Review the disclosure statement to confirm the issue wasn't mentioned. Consult with a real estate attorney to evaluate your legal options, which might include claims for fraudulent misrepresentation, fraudulent concealment, or breach of contract. There's typically a statute of limitations for such claims, so act promptly. Consider whether the issue affects your tenants' habitability rights and address any immediate safety concerns. Keep detailed records of all repair costs, as these may be recoverable damages if you pursue legal action.