August 2011, legal counsel for the Arizona Association of Realtors created a document called the Residential Lease Owner’s Property Disclosure Statement (LOPDS for short) and recommended that rental agents encourage their clients to use it.  It is very similar to the Seller Property Disclosure Statement (SPDS) which has been widely used in the sale of real estate for years.

The LOPDS was designed to serve several purposes:

It gives the Landlord a very clear way to avoid inadvertent non-disclosure of material facts.  Even inadvertently failing to disclose certain issues may be a violation of Arizona Law.  Why go there?

It gives the Tenant a very clear means to discover any known problems with the property and helps the Tenant to make informed decisions about the property.

It helps all parties get on the same page and thus hopefully avoid problems or litigation later.

Happy Tenant / Happy Landlord

In my experience an informed tenant is much more likely to be a happy tenant.  Happy tenants tend to cost landlords less money thereby making happy landlords.

The strange thing is that even though this document was created by an unbiased third party and its use is recommended by the Arizona Association of Realtors, real estate agents have been very slow to accept it.

Some landlord agents state that the Landlord has “never lived in the property, therefor has no knowledge of the property and won’t fill out a disclosure statement.”  This is complete and absolute hog wash.

Line 9 of the LOPDS asks the Landlord: “Are you current on: mortgage, property tax and HOA fees.” Certainly the Landlord knows the answer to those questions.  And CERTAINLY the answers are important to the prospective tenant.

Line 21 asks the Landlord: “How many parking spots are available for tenants?”  Another important question to a tenant and certainly something the Landlord should know.

The form asks other questions about known structural problems, known AC or heating problems, known electrical problems and more.

Gang, if a landlord refuses to answer these questions do you really want to rent the condo?  I mean are they just being lazy or are they intentionally trying to hide something.  Either way this should be a red flag.

Landlords, if your agent discourages you from completing an LOPDS then ask yourself “why?”  Landlords have certain obligations pursuant to the Arizona Landlord and Tenant Act and other laws.  Why expose yourself to a possible law suit?  Take the ten or fifteen minutes and fill out the form.

Disclosing known issues does NOT obligate the landlord to correct the issues unless the issues render the property uninhabitable or pose a real or potential threat to a tenant’s health or safety (hiding such issues could get a landlord into real trouble down the road).

Quick Story

Here’s another reason for a landlord to complete the form to the best of his or her knowledge.

Once upon a time I represented a seller of a home.  I strongly encouraged the seller to disclose any and all known problems with the property using a SPDS (remember this is the sister form to an LOPDS).  A question in the SPDS specifically asks if there are any known problems to any doors on the property.  Turns out that a bathroom door had been severely cracked along the door knob at some point and screwed back together somewhat haphazardly.  Unfortunately the seller did not disclose this to anyone.

I never noticed the cracked door.

The buyer never noticed the cracked door.

The buyer’s inspector never noticed the cracked door.

Just before closing the buyer noticed the cracked and the buyer believed that the crack was new and insisted the owner replace the door.

The owner swore that the crack had been there all along BUT the remember the owner did not mention the issue in the SPDS.

The owner had to buy a new door.

Moral of the Story

If your response to the story above is that sales are different than rentals I would agree with you….mostly.  However, I will always stress the importance of disclosing known problems with any property.  Simply saying that you don’t know anything won’t hold up if the proverbial stuff hits the fan.

It’s better to put all your cards on the table up front.  Disclose known problems up front while the renter or buyer is excited about the property and willing to overlook little things like cracked doors.  If you try to sneak it by, or simply forget that it’s there, then you might pay a price later.  Remember….disclose, disclose, disclose.