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July 2004

Property Disclosure Statement Helps Protect Consumers

Buying a home is probably the biggest single purchase most consumers will ever make, one that requires careful research and evaluation. Working with a trusted and experienced REALTOR® can help you make a sound decision. Other layers of consumer protection are also provided by the real estate industry.

In 1991, the B.C. Real Estate Association introduced the Property Disclosure Statement (PDS), a detailed form asking the seller of a property to disclose any defects to the prospective buyer. The PDS (and its complementary forms, the Strata Property Disclosure Statement and the Rural Property Disclosure Statement) is now required for all new listings in B.C. and can be legally incorporated into the contract for purchase and sale.

The principle behind the PDS is simple: if a seller knows about a defect in the property, he or she must disclose it. The PDS identifies potential problems such as buried oil tanks (found in the backyards of some older houses, left behind from the era of oil heating), formaldehyde insulation, unauthorized rental suites, renovations done without a permit, moisture problems, and other issues. Additionally, the PDS was amended in February 2004 to indicate whether a property has been used as a marijuana grow operation or chemical drug lab. Hidden costs, such as a neighbourhood improvement levy that may not be listed the home's tax statement, must also be noted on a PDS.

"Before the PDS existed, buyers sometimes found themselves dealing with the cost and hassle of draining and removing a buried oil tank – discovered only when they began building an addition or a swimming pool," said one North Shore REALTOR®. "If the house had changed hands several times, the sellers may not have known about the tank. Now the PDS makes sure the issue has been clarified. If the sellers don't know, the buyers can ask them to investigate and pay the cost of removal."

The Strata Property Disclosure Statement covers a range of condominium-specific issues such as special assessments, restrictions on pets, rentals, or age; and building envelope problems. Likewise, the Rural Property Disclosure Statement identifies issues related to rural land, such as the quality of well water, septic systems, and flooding problems.

Local REALTORS® emphasize that the PDS protects the seller as well as the buyer. One North Shore REALTOR® described a case in which the sellers indicated on the PDS that a sundeck had been replaced without a permit. The buyers later held a large party on the sundeck and a railing collapsed, causing an accident. Had the PDS not been properly filled out, the sellers likely would have been sued.

Two considerations about the PDS should be noted. First, the PDS is not required by law. In some situations, such as an estate sale or third-party sale, the seller may not have enough information to complete the PDS, and the buyer will need to rely on other sources of information. Second, the PDS is not a legally-binding warranty of the property's condition; it is only a report of what the seller knows about the property.

Given these limitations, REALTORS® emphasize that the PDS is never a substitute for a thorough, professional home inspection. There may be issues that the seller is not aware of, or in unfortunate cases, problems that the owner deliberately conceals. "The PDS covers what the owner knows," explained a local REALTOR®. "But you still need a good home inspector to go over every detail of the property, to estimate the scope of any problems and what repairs might be needed."

For more information about the PDS and how it helps protect you as a real estate consumer, speak with your REALTOR®.