The "Required" Real Estate Disclosure Statement Isn't Required

        If you are selling your home in Tennessee, you must comply with The Residential Property Disclosure Act (66-5-201 et seq), which applies to residential real property consisting of not less than one (1) nor more than four (4) dwelling units. This act specifies what types of disclosures a seller must make to a buyer as well as the rights, duties, and obligations of the real estate agents to the buyers. Moreover, this act delineates in what circumstances may a buyer bring a cause of action against either the seller or the agent. And those scenarios are extremely limited. This act gives sellers and agents a lot of protection. In fact, this act seems to give too much protection. Without going through all the causes of action, I want to point out a glaring loop-hole that can render the entire act superfluous and may allow a prudent seller, coupled with a dubious buyer, to make zero disclosures, though required by law.

       Section 202 of the act states in pertinent part, “the owner of the residential property shall furnish to a purchaser one of the following:” (1) A residential property disclosure statement regarding the condition of the property, including any material defects known to the owner; or (2) a residential property disclaimer statement stating that the purchaser will be receiving the property “as is.”

       By the language of the act, one would think that this Disclosure Statement is mandatory. Well, technically yes the Disclosure Statement is mandatory, just as the terms state the seller “shall furnish” a statement. However, this provision is unenforceable. Section 208(b) states, in pertinent part, “No cause of action may be instituted against an owner of residential real property subject to this part for the owner's failure to provide the disclosure or disclaimer statement required by this part.”

        Thus, a clever owner will not furnish a disclosure statement of his property to a buyer until compelled to by a buyer who actually knows his rights. Now, failure to provide such a statement upon request would allow the buyer not to go through with the sale; however, if after the purchase, the buyer finds defects in the property and wants to sue the seller, he would not be able to because of 208(b). Moreover, many Purchase Agreements contain a provision requiring the seller, under contract, to furnish the Disclosure Statement. But because of the doctrine of “merger” (article forthcoming discussing merger), after the real estate closing the buyer would not be able to sue the seller under a breach of contract theory. Accordingly, under the current Tennessee law, a buyer is without a post-purchase remedy if a seller never furnished a Disclosure Statement as required by law. Therefore, Caveat Emptor (“Buyer Beware”).

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