3.1 Transfer Disclosure Statement (TDS)

The Statutory Backbone

The Transfer Disclosure Statement (TDS) is the centerpiece of California's residential seller-disclosure regime, created by California Civil Code Sections 1102 through 1102.18. The exam tests it heavily because it codifies the common-law duty announced in Easton v. Strassburger (1984), which held that a broker owes buyers an affirmative duty to disclose facts materially affecting value or desirability that a reasonably competent visual inspection would reveal.

The TDS applies to the sale, exchange, lease with an option to purchase, ground lease coupled with improvements, or installment land contract of real property improved with one to four dwelling units. It does NOT apply to vacant land, commercial buildings, or residential complexes of 5+ units.

"As-Is" Does Not Erase Disclosure

A common exam trap: an "as-is" sale means the seller will not pay for repairs, but it does NOT relieve the seller of disclosing known defects. Civil Code 1102.1 states the disclosure right cannot be waived. A clause attempting to waive the TDS is unenforceable; Loughrin v. Superior Court reinforced that as-is language never shields active concealment or affirmative misrepresentation.

The Three Authors of the Form

The TDS form has three coordinated parts, each signed by a different party:

Section I — Seller's Information

The seller checks off and explains all known conditions: foundation, roof, walls, windows, plumbing, electrical, HVAC, water heater, built-in appliances, pool/spa, drainage, room additions, soil settling, encroachments, easements, shared driveways, neighborhood noise, lawsuits affecting the property, and known deaths within three years. The standard is actual knowledge, not investigation; a seller need not hire experts but cannot lie or conceal.

Section II — Listing (Seller's) Agent Inspection

The listing agent conducts a reasonably competent and diligent visual inspection of accessible areas and discloses observed items materially affecting value.

Section III — Buyer's (Selling) Agent Inspection

When a cooperating agent represents the buyer, that agent performs the same visual inspection and discloses findings. If one agent acts for both parties, Section III is marked accordingly.

Agent inspection duty (Civil Code 2079) is visual and accessible only — agents need not move furniture, open walls, climb inaccessible roofs, or inspect common areas of a condo not owned by the seller. The statute of limitations for an action against an agent for breach of this duty is two years from the date of possession (close of escrow or occupancy, whichever is first).

Delivery Timing and the Buyer's Termination Right

The TDS must be delivered "as soon as practicable before transfer of title" (Civil Code 1102.2). In practice listing agents deliver it with the disclosure package early in escrow.

The high-value rule is the statutory termination (rescission) right under Civil Code 1102.3: if any required disclosure — or a material amendment to one — is delivered after the buyer has signed the offer, the buyer may terminate by delivering written notice within:

Note the email row: California's statute keys the longer 5-day period to delivery that is not in person, and most practitioners treat electronic delivery like mail. The buyer's notice must be in writing; an oral cancellation is ineffective. Delivering the TDS before the buyer signs eliminates the separate statutory termination right (the buyer simply chooses not to sign).

Amended Disclosures Restart the Clock

If the seller learns of new material information (e.g., a fresh roof leak), the seller must deliver an amended TDS. A material amendment triggers a new 3-day/5-day window. Correcting a trivial typo does not.

Who Is Exempt

Civil Code 1102.2 lists transfers exempt from the TDS itself. Memorize the categories — they recur on the exam:

Trap: Exemption from the TDS does not exempt the transfer from the Natural Hazard Disclosure, the lead-based-paint federal disclosure, or the agent's common-law duty to disclose known material facts. A bank selling REO still owes honesty about facts it actually knows.

Worked Scenario

A buyer signs an offer on Monday. The listing agent hand-delivers the completed TDS the following Friday. Because delivery occurred after signing and in person, the buyer has 3 days — through the following Monday — to deliver written notice of termination. If instead the agent had mailed it Friday, the window would be 5 days. If the seller then amends the TDS the next week to disclose a newly found foundation crack, a fresh termination window opens on that amendment.