OCTOBER 2021 FORMS RELEASE
Arizona REALTORS® has published revised drafts of the following three forms: (i) Vacant Land/Lot Seller’s Property Disclosure Statement; (ii) H.O.A. Condominium / Planned Community Addendum; and (iii) Multiple Counter Offer. Below is an explanation of the revisions made to the forms.
H.O.A. Condominium / Planned Community Addendum
The Arizona REALTORS® H.O.A. Condominium / Planned Community Addendum identifies four fees payable upon close of escrow and allows the buyer and seller to decide who will be responsible for paying which fees. Line 31 also allows the seller to identify any other HOA fees that may be payable upon close of escrow. However, the Addendum does not currently address the possibility that additional fees may exist that are not identified by the seller on page one of the Addendum.
To cover this issue, the following two lines will be added to the Addendum:
By way of these lines, the parties can now negotiate and document which party pays any fees not previously identified by the seller on page one of the Addendum.
Multiple Counter Offer
The Multiple Counter Offer to be released on October 1, 2021, evidences a substantive change to lines 40 through 42 which currently state, “Signature by Seller below and delivery to Buyer or Buyer’s Broker as indicated above creates a binding agreement. Seller revokes all other counter offers by separate notice and agrees to sell the Premises to Buyer subject to the terms and conditions contained herein.”
Effective October 1, 2021, the above-referenced lines under the Section titled “Seller Final Acceptance” will be revised to state:
The primary reason for the revision is to help ensure that a Counter Offer not yet accepted is revoked by the seller before entering into a contract with the buyer. Otherwise, the seller can find themselves in the problematic position of having sold the Premises to more than one buyer.
Although the new verbiage achieves the same result, a secondary reason for the revision is that it emphasizes the fact that any previous terms and conditions not modified by this Multiple Counter Offer shall remain unaffected and considered to be accepted. In the event that agents currently insert verbiage into the Multiple Counter Offer stating that all other terms and conditions remain unchanged, that will no longer be warranted.
Vacant Land / Lot Seller’s Property Disclosure Statement
The Vacant Land/Lot Seller’s Property Disclosure Statement was last updated in February 2008. Accordingly, the workgroup[1] chaired by President Jan Leighton had their work cut out for them.
Below is an outline summary of the revisions made to the Vacant Land/Lot Seller’s Property Disclosure Statement (“VLSPDS”), followed by a list of frequently asked questions.
Vacant Land/Lot Seller Advisory
The Advisory page mirrors the Residential Seller’s Property Disclosure Statement Advisory page. Why? Because it expresses the importance of seller disclosures. More importantly, the page now emphasizes that sellers are legally obligated to disclose important facts about the Property and that these disclosure obligations remain even if the parties agree that no VLSPDS will be provided.
Property and Ownership
Disclosing the name of the “Legal owner of the Property” has moved from line 4 to line 6. The new line number provides added room for the name of the legal owner.
The Internal Revenue Service’s definition of a “Foreign Person” as it pertains to the Foreign Investment in Real Property includes a non-resident alien. For that reason, line 11 was updated to reflect that change.
Line 27 now allows for the seller to disclose whether the association governing the Property is subject to mandatory or voluntary membership in an association. Lines 28-30 expand on this information by requesting the seller to disclose the association’s name, contact person, and phone number. Finally, because there could be more than one association, line 31 has been added for disclosure of a second association’s fees and how often those fees are paid.
Lines 50-51 ask the seller if they are aware if the Property is located within the boundaries of a Community Facilities District (CFD). CFDs serve as special taxing districts that developers and municipalities can use to finance the cost of infrastructure improvements, which are ultimately paid by property owners within the district. If the Property is subject to a CFD, the seller is asked to identify the name of the CFD so that the buyer can research their obligations, if any, via the repayment of bonds in the form of an addition to their annual property tax bill.
Access
The yes / no questions previously asked regarding access to the Property, have been replaced with the first four questions addressing access to the Property as shown on the Affidavit of Disclosure. Included with those questions are lines for the seller to provide any explanation they would like to share regarding access to the Property.
A box has been added to lines 65-66 advising the buyer that roads not publicly maintained are the responsibility of the Property owner. Furthermore, roads that are not improved to county standards and accepted for maintenance are not the county’s responsibility.
Use
A property’s zoning is important information for a buyer. Accordingly, line 70 has been added for the seller to provide an explanation of the seller’s knowledge regarding whether the current use of the Property conforms with current zoning.
Utilities
If the Property receives internet service, the seller is now asked on line 83 to disclose that fact and identify the name of the internet provider.
Line 87 now asks the seller to identify whether irrigation is available to the Property.
With an increase in the number of alternate power systems serving properties, lines 91-96 were added to ask whether the seller is aware of any problems with an alternate power system and whether any alternate power systems serving the Property are leased. If so, the seller is asked to provide the name and phone number of the leasing company and attach a copy of the lease, if available. The buyer is further provided with a “Notice to Buyer” advising the buyer that if the Property is served by a solar system, they should read all pertinent documents and review the cost, insurability, operation, and value of the system, among other items.
Water
Lines 116-118 contain a new “Notice to Buyer.” The notice advises the buyer that the Arizona Department of Water Resources may not have made a water supply determination if the property is served by a well, private water company, or municipal water provider. If the buyer would like more information about water supply or any of the water services, the buyer should contact the provider.
Sewer/Wastewater Treatment
Should a buyer purchase vacant property and wish to build later, the buyer needs to know whether sewer/wastewater treatment is available and the type of facility, if any. If the Property is not served by a conventional septic system or alternative system, the seller may disclose another type of system on line 124.
Additionally, two “Notice[s] to Buyer” have been added. The first notice, located on lines 125-126, advise the buyer to contact the appropriate governmental or private provider regarding the availability and cost of sewer connection. The second notice, on lines 140-142, warns the buyer about cesspools.
Environmental Information
A “Notice to Buyer” has been added on lines 160-161 that advises the buyer that the Arizona Department of Real Estate provides earth fissure maps to the public in printed or electronic format upon request. A box to disclose any past or present problems with fissures on the Property has also been added to line 164.
Flood insurance premiums may increase and, in some instances, may be substantially higher than premiums paid for flood insurance prior to the time of sale. As a result, a flood insurance “Notice to Buyer” has been added to lines 187-200 advising buyers not to rely on the premiums previously paid for flood insurance as an indicator of the premiums that will apply after completion of the purchase.
Frequently Asked Questions
Q1. Does Arizona law require sellers to deliver to buyers a completed VLSPDS?
A1. No. Although the seller is legally obligated to disclose all material facts to the buyer, the seller is not required by Arizona law to make these disclosures via the VLSPDS. Note: If the parties are using the Arizona REALTORS® Vacant Land/Lot Purchase Contract, the seller is required to deliver a completed VLSPDS to buyer within five (5) days after Contract acceptance.
Q2. Why was a box added for “voluntary” membership in an association?
A2. Not all associations are mandatory. Because some associations are voluntary, the workgroup thought it pertinent to disclose whether the association is voluntary or mandatory.
Q3. Why were the access questions changed to mirror the Affidavit of Disclosure?
A3. Although the Affidavit of Disclosure is statutorily required only when a seller sells five or fewer parcels of land, other than subdivided land, in an unincorporated area of a county, the workgroup thought that the questions on the Affidavit of Disclosure addressed the access questions better by providing additional lines for the seller to explain their knowledge of access to the Property.
Q4. Why was line 70 added for the seller to provide an explanation of the seller’s knowledge regarding whether the current use of the Property conforms with current zoning.
A4. There are times when the current use of the Property does not conform with current zoning, but the use is considered legal because the land is grandfathered in. Including an explanation line will allow the seller to provide additional informationto the buyer in this regard.
Q5. Why does the form contain so many questions about alternate power systems?
A5. If there are not any alternate power systems serving the Property, the seller should check no on line 88 and skip to line 99. However, if there are any alternate power systems serving the Property, whether the alternate power system is leased is important information as the system may not convey to the buyer. Moreover, if the leased system is to convey, the conveyance will likely need to be approved by the company that owns the system, meaning that the company can require the buyer to meet its credit standards. If the buyer cannot qualify to assume the lease, they may not wish to complete the purchase.
Q6. Why are there so many new “Notice[s] to Buyer”?
A6. Buyers should understand the types of items they may wish to investigate in conjunction with their contemplated purchase of the Property. Accordingly, the notices are to remind buyers of the importance of investigating those items that may impact their use and enjoyment of the property.
Nikki J. Salgat, Esq. is Assistant General Counsel to the Arizona REALTORS®. This article is of a general nature and reflects only the opinion of the author at the time it was drafted. It is not intended as definitive legal advice, and you should not act upon it without seeking independent legal counsel.
[1] Special thanks to the valuable contributions of workgroup members Lee Giblin, Pamelia La Paglia, Bobby Miller, Lisa Paffrath, Tom Pancrazi, Rick Sack, and Joan Wilson. The workgroup was assisted by Arizona REALTORS® staff Scott Drucker, Jan Steward, Nikki Salgat, and Jamilla Brandt.