When state Sen. Larry E. Haines sponsored Maryland's real estate seller-disclosure law in 1993, he never intended it to apply to vacant land. And he didn't want it to be an easy way for a seller to get out of a contract if a better offer came along.
He just wanted it to require that sellers of existing single-family homes tell potential buyers about the property's condition and known defects.
But given the legions of lawyers, Realtors, title companies, buyers and sellers who have tried to apply the law since it took effect in January 1994, it's not surprising that loopholes and conflicting interpretations blossomed.
"Any time you have major legislation, you need to get things clarified," said Mr. Haines, a Carroll County Republican with three decades in real estate sales and his own brokerage firm in Westminster.
To close the loopholes and clear up some of the confusion surrounding certain sections of the statute, the General Assembly passed Senate Bill 437, co-sponsored by Mr. Haines and state Sen. Michael J. Collins, a Baltimore County Democrat, containing amendments that take effect Oct. 1.
The original statute was passed in the 1993 Assembly session to require that sellers of homes -- excluding new construction -- fully disclose the condition of defects or significant information about the condition of the property.
For example, the disclosure form should describe structural problems such as old roofs and leaky basements; and reveal termite problems, hazardous materials like asbestos and lead paint, and be forthcoming about the water, sewer, plumbing, electrical, heating and air-conditioning systems.
Here are some of the more significant provisions of the new amendments:
* The amendments state explicitly that the seller-disclosure form is not a warranty against problems that the seller does not know about. The law does not hold sellers liable for problems they were unaware of and thus could not disclose, Mr. Haines says. In the original statute, "We made it clear it's not a home warranty," he said, but that needed to be more clearly stated because some buyers were confused on that point.
* The law was never intended to apply to sales of unimproved land, Mr. Haines said, but some lawyers suggested that it might because of references to hazardous material disclosure. So now the statute will specifically exempt unimproved real property.
* The disclosure form will include a notice to buyers that it is not a substitute for the services of an independent home inspection company, "and that the purchaser may wish to obtain such an inspection," the amendments state.
* The original statute said that if the seller delivered the disclosure form to the buyer more than three days after signing the contract, the contract was void.
Unintentionally, this created the possibility that after a contract was signed, the seller might get a better offer and kill the first deal simply by not delivering the disclosure form to the first buyer.
This section was removed; now, if the seller is tardy with the disclosure form, the buyer has the option to cancel the contract, but it isn't automatically voided.
* The original statute was intended to exempt only new homes from the seller-disclosure form.
It tried to do this by saying that the disclosure law did not apply to "the initial sale of single-family residential real property." But some people who built their own homes and were now selling them claimed that they were exempt because this was the "initial sale."
"There was some confusion on that," Mr. Haines said.
The amendments made clear that the exemption only applies in initial sales when the home has never been occupied or when the certificate of occupancy has been issued within a year before the sales contract is signed.
* The amendments direct the State Real Estate Commission to develop a new form to simplify the disclosure process. Currently, there are two forms, a disclosure document and a disclaimer form. A seller has the right to forgo the disclosure form and instead sign a disclaimer document that says that the home is being sold "as is," with whatever defects that may exist.
Some sellers do this, rather than bother with disclosure, particularly with old homes.
By combining the two forms into one, there will be less confusion as to whether a seller was informed by a real estate agent that there was a choice of disclosing or disclaiming, Mr. Haines said.
Assistant Attorney General Elizabeth Trimble, counsel to the commission, said the new forms will be ready by Oct. 1.
Mr. Haines said he believes some 80 percent or more of home sellers are filling out the disclosure forms, rather than signing the "as is" disclaimer.
Adam D. Cockey Jr., president-elect of the Greater Baltimore Board of Realtors, also believes the majority of sellers are disclosing.
"Newer properties are easier to disclose," Mr. Cockey said.
