New Property Disclosure Requirements Will Impact Some Cities and Counties

[Update: the 2016 Legislature again took action on this issue by adopting EHB 2971, which amended the 2015 legislation, which is discussed below, and clarified the ambiguity regarding how the information must be posted by requiring summaries and internet links. For more information, see our Recent Legislative Changes to Landlord/Seller Disclosure Requirements blog post from 8/3/2016.]

This past legislative session, the Legislature enacted EHB 2122. Although EHB 2122 relates primarily to real estate excise tax (REET) authority, it includes new requirements that apply to any city or county in the state that has in place, or is contemplating enacting, regulations that require certain disclosures by landlords and sellers of real property to buyers and tenants regarding the property and the surrounding area. Although, to our knowledge, these new requirements will apply to only a limited number of cities and counties, the potential impact on those jurisdictions could be significant. The new disclosure requirements are effective September 26, 2015.

In an unexpected twist for MRSC, EHB 2122 includes a mandate on applicable cities and counties related to MRSC. (“Cities,” as used here, also means towns.) To be clear, MRSC didn’t seek or advocate for this new role, but we’re committed to doing all that is necessary to comply with this new legislative mandate.

As described in more detail below, EHB 2122 mandates that MRSC post on a specific section of the MRSC website a list, by jurisdiction, of all requirements imposed by cities and counties on landlords and sellers of real property to provide information to a buyer or tenant pertaining to the subject property or the surrounding area. EHB 2122 also provides that, if cities and counties that have such regulations don’t comply with the new posting requirement, the requirements in those local regulations aren’t legally effective.

Why were these new posting requirements enacted?

It’s my understanding that this legislative change was made, in part, as a consumer protection measure to allow buyers, real estate agents, and tenants to more easily find certain locally-imposed disclosure requirements that apply to the property they’re interested in buying or renting.

What local regulations does this apply to?

Section 4(1) of EHB 2122, which adds a new section to chapter 64.06 RCW (related to real property transfers and disclosures), applies to any local regulation (i.e., ordinance, resolution, or policy) adopted on or after September 26, 2015 (the effective date of EHB 2122) that imposes on landlords or sellers of real property, or their agents, a requirement that they provide information to a buyer or tenant “pertaining to the subject property or the surrounding area.” It provides that any such regulation is effective only after it is posted on the MRSC website in accordance with RCW 43.110.030(2)(e), as I discuss below.

Section 4(2) of EHB 2122 applies to the type of local regulations described above that are in place prior to September 26, 2015 (the effective date of EHB 2122). Any such regulations must be posted on the MRSC website in accordance with RCW 43.110.030(2)(e) within 90 days of September 26, 2015 or they “shall cease to be in effect.”

What is meant by “pertaining to the subject property or to the surrounding area”?

The requirements of posting on the MRSC website in Sections 4 and 5 of EHB 2122 apply to any ordinance, resolution, or policy adopted by a city or county that requires landlords and sellers of real property “to provide information to a buyer or tenant pertaining to the subject property or the surrounding area.” (My emphasis.) Unfortunately, I don’t have a definitive answer as to exactly what this language means, as it is not a model of clarity.

It seems reasonable to presume that “pertaining to the subject property or the surrounding area” is intended to apply to, at least, local disclosure requirements related to land uses in the surrounding area that may be of concern to a buyer or tenant. For example, this could include a requirement that sellers or landlords disclose that the property is within an airport noise zone or near designated farmland.

What is less clear, however, is whether these new disclosure requirements apply, for example, to information that landlords are required to provide to tenants regarding their rights. If, for example, a city has a local requirement that landlords provide information to tenants related to the respective legal rights of the landlord and tenant, such as a local just-cause eviction provision, is that the type of disclosure requirement governed by EHB 2122? Our guess is that, because such disclosure requirements do not apply to specific property being sold or rented (“the subject property”), but rather apply to landlords in general, the posting requirement in EHB 2122 wouldn't be triggered, but that's a guess, not a certainty.

Hopefully, further clarity on the issue will be provided in the future by the Legislature. Until such time, however, those cities and counties to which these new requirements may apply will need to work closely with their legal counsel regarding how to proceed. We recommend that, if in doubt, cities and counties interpret these new posting requirements broadly, because local regulations covered by EHB 2122 aren’t legally enforceable if they aren’t posted as required by RCW 43.110.030(2)(e).

What about the website posting requirements?

Under Section 5 of EHB 2122, which amends RCW 43.110.030, the scope of “municipal research and services” that MRSC provides through its contract with the Department of Commerce is expanded. MRSC’s obligation under this legislation is to provide on a specific section of its website (as described below): (1) a list, by jurisdiction, of all requirements imposed by cities and counties on landlords or sellers of real property to provide information to a buyer or tenant “pertaining to the subject property or to the surrounding area”; (2) information for posting provided by cities and counties related to such requirements; and (3) the ordinances, resolutions, or policies imposing those requirements.

Isn’t there a bit of a disconnect between what’s required in Section 4 and what’s required in Section 5 of EHB 2122 related to the website posting requirements?

Yes. Section 4 requires that ordinances, resolutions, or policies adopted by cities and counties that impose certain requirements on landlords or sellers of real property be posted electronically as provided in Section 5. So, under Section 4, it is the “ordinance, resolution, or policy” that is to be posted electronically.

Section 5, however, provides that MRSC must provide on its website “a list of all requirements imposed by all cities, towns, and counties on landlords or sellers of real property to provide information to a buyer or tenant pertaining to the subject property or the surrounding area.” (My emphasis.) Section 5 also states that “Cities, towns, and counties must provide information for posting on the web site in accordance with section 4 of this act.” (My emphasis.)

So what must cities and counties provide to MRSC for posting?

Our interpretation of these provisions is that, in order to comply with EHB 2122, cities and counties to which these provisions apply must provide to MRSC, for posting on the MRSC website:

• the ordinance, resolution, or policy imposing the requirements; as well as
• a “list of all requirements” and “information for posting” related to such requirements.

Our interpretation of EHB 2122 is that MRSC isn’t responsible for creating the list for each city or county. Presumably, the “information for posting” provided by cities and counties could include a brief description of the disclosure requirements at issue.

Again, given the lack of clarity with these new requirements, it’s important that the cities and counties to which these requirements apply consult with their legal counsel about what may be specifically required.

The new webpage that MRSC is providing in compliance with EHB 2122 is entitled Disclosure Requirements Imposed on Landlords and Sellers of Real Property. That webpage has information about how to provide to MRSC, pursuant to EHB 2122, the applicable ordinances, resolutions, or policies.

Photo courtesy of Robert Fairchild.