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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.

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Key Things to Know

  1. 1

    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.

  2. 2

    Disclosure statements typically cover known issues only—sellers generally aren't required to hire inspectors to discover unknown problems.

  3. 3

    For landlords selling rental properties, tenant-reported maintenance issues should be included in your disclosures, even if you haven't personally verified them.

  4. 4

    Tenants' lease rights are generally protected when a rental property is sold; the new owner typically must honor existing lease terms.

  5. 5

    Real estate investors should maintain detailed property records and consider pre-listing inspections to facilitate accurate disclosures.

  6. 6

    Selling a property 'as-is' does not exempt sellers from disclosure requirements—you must still disclose known material defects.

  7. 7

    The consequences of inadequate disclosure can include lawsuits, monetary damages, rescission of the sale, and significant legal expenses.

  8. 8

    When in doubt about whether to disclose something, the safer legal approach is to include it in your disclosure statement.

Key decisions before you file

Before you file a Property Disclosure Statement in Michigan, a few decisions shape the document: which option to choose and what each one means. The Property Disclosure Statement guide walks through them.

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Michigan Requirements for Property Disclosure Statement

  • Seller Disclosure Act (Michigan Seller Disclosure Act (Act 92 of 1993), MCL 565.951-565.966)

    Michigan's Seller Disclosure Act requires sellers of residential property to complete a disclosure form revealing known conditions and defects of the property. This form must be delivered to buyers before they make an offer.

  • Lead-Based Paint Disclosure (Residential Lead-Based Paint Hazard Reduction Act of 1992, 42 U.S.C. § 4852d)

    Federal law requires disclosure of known lead-based paint and lead-based paint hazards in housing built before 1978, including providing buyers with an EPA-approved information pamphlet and a 10-day period to conduct a paint inspection.

  • Environmental Hazards Disclosure (Michigan Environmental Protection Act, MCL 324.20101 et seq.)

    Michigan law requires disclosure of known environmental contamination, including but not limited to radon, asbestos, mold, and other toxic substances that may affect the property.

  • Flood Zone Disclosure (National Flood Insurance Act, 42 U.S.C. § 4001 et seq.)

    Federal law requires disclosure if a property is located in a Special Flood Hazard Area (SFHA) as designated by FEMA, particularly if federally-backed financing is involved.

  • Methamphetamine Production Disclosure (Michigan Public Health Code, MCL 333.12103)

    Michigan law requires disclosure if the property was used as a methamphetamine laboratory, unless proper remediation has been completed according to state guidelines.

  • Stigmatized Property Disclosure (Michigan case law; Conahan v. Fisher, 463 Mich 545 (2000))

    Michigan law does not specifically require disclosure of deaths (including suicides or murders) or paranormal activity claims on a property, but material facts that could affect property value should be disclosed.

  • Homeowners' Association Disclosure (Michigan Condominium Act, MCL 559.101 et seq.)

    Sellers must disclose if the property is subject to a homeowners' association, condominium association, or other community governance structure, including applicable fees, restrictions, and bylaws.

  • Water and Sewer System Disclosure (Michigan Seller Disclosure Act, MCL 565.957)

    Disclosure of the type of water system (municipal, well) and sewer system (municipal, septic) is required, including known problems with these systems.

  • Structural Defects Disclosure (Michigan Seller Disclosure Act, MCL 565.957)

    Sellers must disclose known structural issues including foundation problems, roof leaks, basement water infiltration, and other material defects affecting the physical integrity of the property.

  • Mechanical Systems Disclosure (Michigan Seller Disclosure Act, MCL 565.957)

    Disclosure of the condition of heating, cooling, electrical, plumbing systems, and any known defects or malfunctions is required under Michigan law.

  • Boundary Dispute Disclosure (Michigan Seller Disclosure Act, MCL 565.957)

    Sellers must disclose any known boundary disputes, encroachments, or easement issues affecting the property.

  • Zoning Violation Disclosure (Michigan Seller Disclosure Act, MCL 565.957; Michigan Zoning Enabling Act, MCL 125.3101 et seq.)

    Known violations of zoning ordinances, building codes, or land use restrictions must be disclosed to potential buyers.

  • Material Defect Disclosure (Common law duty of disclosure; Johnson v. Davis, 480 So.2d 625 (Fla. 1985) (widely followed precedent))

    Federal and state laws require disclosure of all known material defects that could significantly affect the property's value or desirability, even if not specifically mentioned in the disclosure form.

  • Pest Infestation Disclosure (Michigan Seller Disclosure Act, MCL 565.957)

    Sellers must disclose known pest infestations or damage, including termites, carpenter ants, or other wood-destroying organisms.

  • Underground Storage Tank Disclosure (Michigan Underground Storage Tank Regulations, Part 211 of Natural Resources and Environmental Protection Act, MCL 324.21101 et seq.)

    Michigan law requires disclosure of known underground storage tanks on the property, whether currently in use or abandoned.

  • Utility Costs Disclosure (Michigan Seller Disclosure Act, MCL 565.957)

    While not explicitly required by statute, disclosure of typical utility costs may be necessary to fulfill the general obligation to disclose material facts about the property.

  • Property Tax Information (Michigan Seller Disclosure Act, MCL 565.957)

    Sellers must disclose current property tax information, including any pending reassessments, tax liens, or special assessments.

  • Megan's Law Disclosure (Michigan Sex Offenders Registration Act, MCL 28.721 et seq.)

    While Michigan does not require sellers to disclose the presence of registered sex offenders in the area, real estate agents may have disclosure obligations under certain circumstances.

  • Mold Disclosure (Michigan Seller Disclosure Act, MCL 565.957)

    Sellers must disclose known mold problems that may affect the health of occupants or the structural integrity of the property.

  • Electromagnetic Field Disclosure (Michigan Seller Disclosure Act, MCL 565.957)

    While not explicitly required by Michigan law, disclosure of high-voltage transmission lines or other sources of electromagnetic fields near the property may be necessary if they could materially affect property value.

Frequently Asked Questions