FACTS: A property owner (Subdivider) offered 40 lots for sale. The Subdivider has a public report from a year earlier which shows there is no expansive soil within the community. The Subdivider and a buyer entered into a contract for one of the lots and the Subdivider provided the buyer with the existing public report.

Months later, the Subdivider’s broker discovered that the city is requiring all builders to perform soil tests before building because there is expansive soil in the area.

ISSUE: Should the public report be updated disclosing the city requirement for soil testing, and can the Buyer cancel with this newly discovered requirement?

ANSWER: See Discussion.

DISCUSSION:         

If, at any time after approval and issuance of the Public Report, there is a material change to the development, the offering, or any disclosures in the Public Report, the Report must be amended and any existing purchasers under contract must be given a copy of the approved amended Public Report.

Furthermore, a seller must disclose known material facts. See Hill v. Jones, 151 Ariz. 81, 85, 725 P.2d 1115, 1119 (App. 1986). A fact is material if it is one to which a reasonable buyer would attach importance in making a decision as to the consideration to be paid for the property. Id.

Based on the above, the public report should be amended because the Subdivider is now aware of expansive soils and the city requirement for soil testing.  Upon receipt of the newly disclosed information, the buyer may thereafter cancel the contract.