Five Things to Know About the Owner’s Affidavit in Real Estate Transactions

Kerr Russell
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Kerr Russell

In real estate transactions, one of the most important documents a seller will execute is the “Owner’s Affidavit” (also sometimes called a “Seller’s Affidavit” or “Affidavit of Title”). Often, purchase agreements require the Seller to provide an Owner’s Affidavit at closing.

The Owner’s Affidavit allows for the deletion of several “standard exceptions” to the title insurance policy for the buyer and lender. Below are five essential things to understand about the Owner’s Affidavit.

  1. It’s the Most Important Document Between the Seller and the Title Company The Owner’s Affidavit is a sworn statement that outlines the seller’s knowledge of the property’s status. The seller is required to disclose its knowledge of any unpaid liens, ongoing disputes, tenants, or recent construction. The seller is legally responsible for the truthfulness of the statements made in the Owner’s Affidavit. Any errors, omissions, or inaccuracies can create liability for the seller, even after the transaction has closed. It is essential for the seller to carefully review the affidavit for accuracy before signing. It should not be treated as a standard form document that cannot be revised.
  2. Revise, Revise, Revise Many sellers are handed a standard form affidavit and told to sign it at closing, but that form may not accurately reflect the specific circumstances of the property or the transaction. If the form includes language that is inaccurate or inapplicable (for example, affirming there are no tenants when there are) then it should be updated accordingly. Sellers should review the affidavit in advance of closing and work with their attorney to make appropriate revisions.
  3. Avoid Personal Liability If the seller is an entity, such as an LLC or corporation, the individual signing on behalf of the seller must be careful to sign only in their official capacity (e.g., “John Smith, as Manager of ABC LLC”), and not sign in an individual capacity. Signing in an individual capacity can unintentionally create personal liability for matters that should be the responsibility of the entity.
  4. Disclose Any Tenants or Leases If the property is subject to any leases, or if any tenants will remain in possession after closing, this must be disclosed in the affidavit. Even if the lease is being assigned as part of the transaction, its existence still needs to be stated. If there are a large number of tenants, attach a rent roll as an exhibit.
  5. Disclose Any Construction Within the Past 120 Days Construction work (including repairs, improvements, or alterations) that has been recently performed must be disclosed on the affidavit. Most title companies require that any construction work within the past 120 days be disclosed. Disclosure of this information is required because unpaid contractors or suppliers may have lien rights that could affect the title. If there is a tenant in possession, they may have performed work the owner isn’t aware of. In such cases, the owner should revise the affidavit to clarify that the owner, specifically, has not caused any improvements. If the tenant is also the purchaser of the property, ask the title company to prepare a “Leaseholder’s Affidavit” to be signed by the tenant/purchaser at closing. This way, the obligation of disclosing any construction work on the property can be shifted to the tenant/purchaser.

The Owner’s Affidavit is more than a formality, it’s a crucial legal document with real consequences. Sellers should approach it with care, ensure that all statements are accurate, and revise where necessary.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Attorney Advertising.

© Kerr Russell

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Kerr Russell
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