GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1993

H	2 

HOUSE BILL 1032
Committee Substitute Favorable 5/12/93

Short Title:  Residential Prop. Disclosure.	(Public)
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Sponsors:
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Referred to:  
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April 19, 1993

A BILL TO BE ENTITLED
AN ACT TO CREATE THE RESIDENTIAL PROPERTY DISCLOSURE ACT.
The General Assembly of North Carolina enacts:
Section 1.  The General Statutes are amended by adding a new Chapter to read:
"Chapter 47E.
"Residential Property Disclosure Act.
"§ 47E-1.  Applicability.
The provisions of this Chapter apply only to transfers by sale, exchange, installment land sales contract, option, or lease with option to purchase, of residential real property consisting of not less than one nor more than four dwelling units, whether or not the transaction is with the assistance of a licensed real estate broker or salesman.
"§ 47E-2.  Exemptions.
The following transfers are specifically excluded from the provisions of this Chapter:
(1)	Transfers pursuant to court order, including transfers ordered by a court in administration of an estate, transfers pursuant to a writ of execution, transfers by foreclosure sale, transfers by a trustee in bankruptcy, transfers by eminent domain, and transfers resulting from a decree for specific performance.
(2)	Transfers to a beneficiary from the grantor or his successor in interest in a deed of trust, or to a mortgagee from the mortgagor or his successor in interest in a mortgage, if the indebtedness is in default; transfers by a trustee under a deed of trust or a mortgagee under a mortgage pursuant to a foreclosure sale, or transfers by a beneficiary under a deed of trust who has acquired the real property at a sale conducted pursuant to a foreclosure sale under a deed of trust.
(3)	Transfers by a fiduciary in the course of the administration of a decedent's estate, guardianship, conservatorship, or trust.
(4)	Transfers from one or more co-owners solely to one or more other co-owners.
(5)	Transfers made solely to a spouse or a person or persons in the lineal line of consanguinity of one or more transferors.
(6)	Transfers between spouses resulting from a decree of divorce or a distribution pursuant to Chapter 50 of the General Statutes.
(7)	Transfers made by virtue of the record owner's failure to pay any federal, state, or local taxes.
(8)	Transfers to or from the State or any political subdivision of the State.
(9)	Transfers involving the first sale of a dwelling never inhabited.
"§ 47E-3.  Required disclosures.
(a)	With regard to transfers described in G.S. 47E-1, the owner of the residential real property shall furnish to a purchaser one of the following:
(1)	A residential property disclaimer statement stating that the owner makes no representations as to the condition of the real property or any improvements to the real property, and that the purchaser will be receiving the real property 'as is', that is, with all defects which may exist, if any, except as otherwise provided in the real estate purchase contract; or
(2)	A residential property disclosure statement disclosing those items which are required to be disclosed relative to the condition of the property.  Such disclosure form shall include material defects regarding:  (i) the water and sewer systems, including the source of household water, water treatment system, or sprinkler system; (ii) insulation; (iii) structural systems, including the roof, walls, floors, foundation, and any basement; (iv) plumbing, electrical, heating, and air conditioning systems; (v) wood-destroying insect infestation; (vi) land use matters; (vii) hazardous or regulated materials, including asbestos, lead-based paint, radon, and underground storage tanks; and (viii) other material defects known to the owner.  The disclosure form shall contain a notice to the prospective purchasers and owners that they may wish to obtain professional advice about, or inspections of, the property.  The owner shall not be required to procure any independent inspection of the property in order to make the disclosures required by this Chapter.
(b)	A residential property disclaimer statement shall read as follows:
'RESIDENTIAL PROPERTY DISCLAIMER STATEMENT

Notice to Seller and Purchaser

The North Carolina Residential Property Disclosure Act requires the owner of residential real property consisting of 1-4 units, whenever the property is to be sold, exchanged, optioned or leased with an option to purchase, to furnish to the purchaser either (a)	a RESIDENTIAL PROPERTY DISCLAIMER STATEMENT stating that the owner makes no representations as to the condition of the property, except as otherwise provided in the purchase contract, or (b) a RESIDENTIAL PROPERTY DISCLOSURE STATEMENT disclosing defects in the condition of the property.  Certain transfers of residential property are excluded from this requirement by G.S. 47E-2.

NOTE TO OWNER(S): Sign this statement only if you elect to sell the property without representations as to its condition, except as otherwise provided in the purchase contract; otherwise, complete and sign the RESIDENTIAL PROPERTY DISCLOSURE STATEMENT.

Property Address/
Legal Description:

The undersigned owner(s)	of the real property described above make no representations as to the condition of the real property or any improvements on the real property, and the purchaser will be receiving the real property 'as is', that is, with all defects which may exist, if any, except as otherwise provided in the real estate purchase contract.

The owner(s) acknowledge having carefully examined this statement before signing below:

Owner	Date	Owner	Date

The purchaser(s) acknowledge receipt of a copy of this disclaimer statement and further acknowledge that they have carefully examined it before signing below:

Purchaser	Date	Purchaser	Date'
(c)	A residential property disclosure statement shall read substantially as follows:
'RESIDENTIAL PROPERTY DISCLOSURE STATEMENT

Notice to Seller and Purchaser

The North Carolina Residential Property Disclosure Act requires the owner of residential real property consisting of 1-4 units, whenever the property is to be sold, exchanged, optioned, or leased with an option to purchase, to furnish to the purchaser either (a)	a RESIDENTIAL PROPERTY DISCLAIMER STATEMENT stating that the owner makes no representations as to the condition of the property, except as otherwise provided in the purchase contract, or (b) a RESIDENTIAL PROPERTY DISCLOSURE STATEMENT disclosing defects in the condition of the property.  Certain transfers of residential property are excluded from this requirement by G.S. 47E-2.

NOTE TO OWNER(S): Sign this statement only if you elect to sell the property and disclose items relative to the condition of the property; otherwise, complete and sign the RESIDENTIAL PROPERTY DISCLAIMER STATEMENT.

Property Address/
Legal Description:

The undersigned owner(s)	of the real property described above disclose the following defects with regard to:
(1)	The water and sewer systems, including the source of household water, water treatment system, sprinkler system:

(2)	Insulation:

(3)	Structural systems, including the roof, walls, floors, foundation, and any basement:

(4)	Plumbing, electrical, heating, and air conditioning systems:

(5)	Wood-destroying insect infestation:

(6)	Land-use matters:

(7)	Hazardous or regulated materials, including asbestos, lead-based paint, radon, and underground storage tanks:

(8)	Other material defects:

The prospective purchaser and owner may wish to obtain professional advice about, or inspections of, the property. The owner has a duty to disclose any material inaccuracy in this statement or any material change in the property which is discovered between the date of this statement and the closing of the transaction.
The owner(s) acknowledge having carefully examined this statement before signing below:

Owner	Date	Owner	Date

The purchaser(s) acknowledge receipt of a copy of this disclosure statement and further acknowledge that they have carefully examined it before signing below:

Purchaser	Date	Purchaser	Date'
(d)	A residential property disclosure statement may utilize any format, including boxes for checking, that substantially discloses the information required by this section or that the condition of any item listed is unknown.
"§ 47E-4.  Time for disclosure; cancellation of contract.
(a)	The owner of residential real property subject to this Chapter shall deliver to the purchaser the written disclosures or disclaimer required by this Chapter no later than the time the purchaser makes an offer to purchase, exchange, option, or lease with option to purchase the property.  The residential property disclaimer statement or residential property disclosure statement may be included in the real estate purchase contract, in an addendum, or in a separate document.
(b)	If the disclosure or disclaimer required by this Chapter is delivered to the purchaser after he makes an offer, the purchaser may terminate any resulting real estate contract no later than three days after the purchaser receives the disclosure or disclaimer form.
In order to terminate a real estate contract when permitted by this section, the purchaser shall, within the time required above, give written notice to the owner or the owner's agent either by hand delivery or by depositing into the United States mail, postage prepaid, and properly addressed to the owner or the owner's agent.  If the purchaser terminates a real estate contract in compliance with this section, the termination shall be without penalty to the purchaser, and any deposit shall be promptly returned to the purchaser.  Any rights of the purchaser to terminate the contract provided by this section are waived conclusively if not exercised prior to settlement or occupancy by the purchaser, in the case of a sale or exchange, or prior to occupancy, in the case of a lease with option to purchase.
"§ 47E-5.  Owner liability for disclosure of information provided by others.
If the owner chooses to provide a disclosure of property condition pursuant to G.S. 47E-3(a)(2) above, the owner may discharge his duty to disclose by providing a written report by a public agency or by an engineer, land surveyor, geologist, pest control operator, contractor, home inspector or other expert, dealing with matters within the scope of the public agency's functions or the expert's license or expertise.  The owner shall not be liable for any error, inaccuracy, or omission of any information delivered pursuant to this subsection if the error, inaccuracy, or omission was made in reasonable reliance upon the information provided by the public agency or expert and the owner was not grossly negligent in obtaining the information or transmitting it.
"§ 47E-6.  Change in circumstances.
If, subsequent to the owner's delivery of a disclosure statement to a purchaser, the owner discovers a material inaccuracy in the disclosure statement, or the disclosure statement is rendered inaccurate in a material way by the occurrence of some event or circumstance, the owner shall promptly correct the inaccuracy by delivering a corrected disclosure statement to the purchaser.
"§ 47E-7.  Agent's duty.
A real estate broker or salesman acting as the agent of the owner of residential real property has the duty to inform the owner of the owner's rights and obligations under this Chapter.  Provided the owner's real estate broker or salesman has performed this duty, the broker or salesman shall not be responsible for the owner's willful refusal to provide a prospective purchaser with a disclaimer or disclosure statement.  Nothing in this Chapter shall be construed to conflict with, or alter, the broker or salesman's duties under Chapter 93A of the General Statutes.
"§ 47E-8.  Effective date.
An owner of real estate shall be required to make disclosures pursuant to this Chapter on and after January 1, 1994.  Prior to January 1, 1994, the parties may, by written agreement in the real estate purchase contract, in an addendum to the real estate contract, or in a separate agreement, agree that the provisions of this Chapter shall apply, in which event the owner of residential real property shall provide a purchaser with a residential property disclaimer statement or a residential property disclosure statement.
"§ 47E-9.  Authorization to prepare forms; fees.
The North Carolina Real Estate Commission is authorized to prepare, or cause to be prepared, forms for use pursuant to this Chapter and is authorized to charge a reasonable fee for the forms, not to exceed one dollar ($1.00) per page and not to exceed three dollars ($3.00) per form regardless of the number of pages per form."
Sec. 2.  This act becomes effective January 1, 1994.