Transfer Disclosure Statement (TDS) Required For ‘Mixed Use’ Properties Having Both Commercial and Residential Buildings

Posted on: March 25, 2014

In the recent appellate opinion of Randall S. Richman V. Mark Hartley  (2d Civil No. B245052

Filed 3/20/14), in a matter of first impression, the Court held that a Transfer Disclosure Statement  (“TDS”) is required in any transfer of real property “improved with or consisting of not less than one nor more than four dwelling units,” even if the property also has commercial uses.

In this case, arising from a sale in Ventura County, the seller (Richman) did not provide a TDS to the buyer (Hartley) because the property is “mixed-use,” i.e., improved with both residential and commercial buildings, and because the “essential use” of the property was commercial.

Hartley sued Richman for breach of the purchase contract for failure to provide ‘all disclosures required by law’ and brought a Motion for Summary Judgment.  Richman defended by arguing  that the TDS is not required where the property is a mixed use property essentially commercial in nature. The trial court granted the motion finding that Richman was required as a matter of law to deliver a TDS, and because he did not do so, he failed to demonstrate his own performance under the purchase agreement and Hartley was entitled to summary judgment.  On appeal, Richman contends that the disclosure requirement applies only to transfers of properties that are solely residential in nature, and not to transfers of mixed-use properties.  The appeals court affirmed the trial court’s granting of summary judgment in favor of Hartley.

On appeal, the Court thoroughly examined the legislative history behind the Transfer Disclosure Law (Civil Code §§§§ 1102, et seq.) and relevant prior case law, concluding that there is no exception to the TDS requirement for ‘mixed use’ property consisting of both commercial and residential buildings containing 1-4 residential dwelling units. Moreover, the TDS requirement cannot be waived as it is a matter of public policy.

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