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Ten months after the closing of the escrow, Vig, a assignee of the original purchaser of the parcel contract, filed a lawsuit against Nix for breach of contract and legal rescission, on the basis that Nix’s disclosure affidavit did not comply with ARS 33-422(F). The trial court held that the disclosure affidavit actually complied with 33-422, so an appeal was filed leading to the opinion in Vig v. Nix Project II Association, 2009 WL 565024 (March 5, 2009). Vig’s problem regarding the substance of the affidavit is that in a question about whether or not there is legal access to the property, the seller “checked” the box (how they say “check” in Australia) for “is NOT” , but did not. fill in the blank provided on the proposed state statute form where space is provided to give an explanation of that answer. Like this: “Explain ________”
The Arizona Court of Appeals first held that an affidavit of disclosure complies with ARS ยง 33-422 as long as it is delivered to the buyer at least seven days before closing, and that the buyer’s failure to formally acknowledge receipt is immaterial. legal. Second, the Court held that, as long as the disclosure affidavit is self-explanatory and puts the buyer under consultation on all pertinent conditions within the scope of the law, it complies with 33-422(F).
The court said that in the case of a “self-explanatory” response, no further “elaboration” is required to satisfy the purpose of the statute. Since the seller disclosed the access “defect”, no further explanation was required; the checked box was sufficient to create a “notice of inquiry” from the buyer. The court does not describe the contours of the “notice of inquiry”; That’s probably because the language of the opinion is self-explanatory! That leaves something of a hole in the ozone ceiling over the territories of real estate agents and title companies; The former are trustees in some respects, while the latter are supposed to secure transactions based in part on review and evaluation of registered documents. The omission of a “query notice” working definition is most pointless. A law dictionary tells you that it is enough notice to alert a normally prudent person to investigate the circumstances further. So how does that work, exactly?
Suppose, for example, that the seller checks the box on the disclosure affidavit indicating “yes”, there is physical access to the property, but does not disclose that a pipe, installed just below the gravel driveway for physical access to be invisible , could it burst and spill water, sewage or natural gas everywhere, if grading the dirt road with a backhoe breaks through the pipeline? Would such failure to disclose a material fact constitute a breach of the implied covenant of good faith and fair dealing? The delivery of the affidavit occurs beyond the negotiation stage of the purchase and sale contract, and since it is the performance of the contract by the seller that triggers the preparation of the affidavit, the omission of a material fact may qualify as a breach of an implied good faith covenant, if such a breach is not made in a material disclosure in the disclosure affidavit.
So what is a Superior Court judge to do in determining whether or not the disclosures in the seller’s affidavit are sufficient to create a notice of inquiry? The Court of Appeals a few years ago provided the missing narrative, I suggest. If the seller fails to disclose a known latent defect or does not give the buyer an adequate opportunity to discover latent defects, the emptor caveat does not apply in Arizona; that supplier must disclose that material defect or, at a minimum, be subject to tort liability for failure to disclose it.
The standard of “misconduct” that constitutes a breach of the legal duty to disclose a known and hidden defect to the buyer is probably not that far removed from the standard that constitutes a breach of the seller’s promise to give the buyer a fair opportunity to obtain the profit from your deal.