2.3 Agency Disclosure Requirements and Forms

When Disclosure Is Triggered

Virginia Code Section 54.1-2138 governs the disclosure of brokerage relationship. The trigger is a substantive discussion about a specific property with an actual or prospective buyer or seller who is not the licensee's client and is not represented by another licensee. At that point the licensee must disclose, in writing, any brokerage relationship the licensee has with another party.

Timing: disclosure must be in writing at the earliest practical time, and in no event later than when specific real estate assistance is first provided. For landlord/tenant deals, the disclosure must appear in the lease application or the lease itself, whichever comes first.

Conspicuousness Requirement

The disclosure may be combined with other documents, but if so it must be conspicuous: printed in bold, ALL CAPITALS, underlined, or set apart in a separate box. A buried, normal-font disclosure does not satisfy the statute.

Substantive vs. Non-Substantive

Why it matters: Disclosure before confidential information is exchanged prevents an unrepresented party from unknowingly revealing strategy to a licensee who represents the other side.

Disclosing Property Condition

Material Adverse Facts

Under Section 54.1-2131 and 54.1-2134, a licensee must disclose to all parties the material adverse facts pertaining to the physical condition of the property that are actually known by the licensee. Licensees are not required to independently investigate the condition or to verify the accuracy of statements made by the seller.

Virginia Stigmatized-Property Law

Virginia Code Section 55.1-713 (formerly 55-524) declares that certain facts are NOT material and need not be disclosed:

A licensee is not liable for failing to disclose these. Best practice: if directly asked, do not lie; refer the buyer to public sources such as the State Police sex offender registry.

Record Retention (18VAC135-20-185)

The REB regulation requires the principal broker to keep transaction records for three years:

• Each executed sales contract, release, lease, and property management agreement
• Each settlement statement and unrepresented-party disclosure: 3 years from closing, or from ratification if the deal fails to close
• Each brokerage agreement: 3 years from execution

Records may be kept electronically — the regulation is silent on format and does not prohibit digital storage — but must be readily accessible from the broker's place of business.

Worked Scenario

A buyer asks Agent Reyes whether the home's prior owner died inside. Reyes knows the answer is yes (a natural death). Under Section 55.1-713 this is not a material fact, so Reyes is not required to volunteer it and is not liable for silence. If asked directly, Reyes should answer truthfully rather than make a false statement. Meanwhile, Reyes does know the basement floods every spring — that is a material adverse physical fact and must be disclosed to all parties.

Common Traps

• Disclosure is triggered by a specific property discussion, not by first contact at an open house.
• A normal-font disclosure combined with other forms is non-compliant — it must be conspicuous.
• Three-year retention runs from closing or ratification, not from the listing date.

The Virginia Residential Property Disclosure Act

Separate from the licensee's brokerage disclosure, the seller of residential property must comply with the Virginia Residential Property Disclosure Act (Title 55.1, Chapter 7). Virginia is a caveat emptor (buyer beware) disclosure state: the seller delivers a Residential Property Disclosure Statement that tells buyers the property is sold "as is" and that the buyer is responsible for exercising due diligence — the form points buyers to flood risk, building codes, sex-offender registry, and similar resources rather than itemizing defects.

Key points the exam tests:

Because Virginia is buyer-beware, the seller statement does not list specific property conditions the way many states require. The licensee's separate duty to disclose known material adverse physical facts still applies on top of this.

Lead-Based Paint (Federal Overlay)

For any housing built before 1978, the federal Residential Lead-Based Paint Hazard Reduction Act requires the seller to give the buyer the EPA pamphlet, disclose known lead hazards, and allow a 10-day inspection period (unless waived). This applies in Virginia on top of state law. A licensee who knows of a pre-1978 home and fails to ensure the lead disclosure is delivered exposes themselves and the principal broker to liability.

Putting It Together

Three disclosure streams run in parallel on a Virginia residential deal: (1) the licensee's brokerage relationship disclosure under 54.1-2138; (2) disclosure of known material adverse physical facts under the brokerage duties; and (3) the seller's Residential Property Disclosure Statement plus any federal lead disclosure. Exam questions often blend these — read carefully to see whether the duty falls on the licensee or the seller.