Late Disclosure Statement and a Five-Day Window
Buyers Lena and Omar sign a contract on a 1978 Columbia townhouse on March 1 for $465,000, with a 21-day financing contingency, a 10-day inspection contingency, and a $10,000 deposit held by the listing broker. The seller delivers the Maryland Residential Property Disclosure and Disclaimer Statement on March 6-five days after ratification-disclosing a prior roof leak, visible mold in the attic, and a basement sump pump that runs constantly. The buyers' home inspector finds active moisture and estimates $18,000 in repairs. Their lender has already ordered an appraisal. The buyers want to terminate, recover the deposit, and cancel the appraisal. The listing agent says the buyers "missed the inspection deadline because they already used five days." The contract states that time is of the essence.
1. What rescission right does Maryland's residential disclosure law give the buyers, and what is the deadline?
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Maryland's residential property disclosure statute requires the seller to deliver the disclosure or disclaimer statement in the manner and timeframe the statute provides. When the statement is delivered after the contract is formed, the buyer generally has a five-day right to rescind by written notice. The buyers received the statement on March 6. If the day of receipt is excluded from the count, the five-day period would end on March 11; if the statute or contract counts differently, the deadline could shift by a day. The buyers should not guess-they should deliver written rescission immediately and confirm the counting method with counsel.
The listing agent's statement that the buyers "already used five days" confuses the inspection contingency with the disclosure rescission right. The disclosure right is separate. If the buyers timely rescind, they do not need to prove a defect or negotiate repairs; the late delivery itself triggers the right. They should cite the disclosure statute and the delivery date in their notice.
2. How do the inspection and financing contingencies interact with the disclosure rescission right?
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The inspection contingency gives the buyers a separate contractual right to inspect and terminate or request repairs within its deadline. If the contract was ratified March 1 and the inspection period is 10 days, the deadline is likely March 11, again depending on how the contract counts days. The buyers' inspector found active moisture and an estimated $18,000 repair, which supports an inspection-based termination or repair request if the deadline has not passed. The financing contingency is also separate and gives the buyers protection if loan approval fails within 21 days.
The buyers should not rely on only one theory. They should send a timely written rescission under the disclosure statute and, in the alternative, a timely inspection-based termination or repair request if the inspection deadline is still open. They should also keep the lender informed and avoid waiving contingencies by conduct. The brokers should document delivery and receipt dates, because the seller may argue that the buyers continued to negotiate after receiving the disclosure and therefore waived the right.
3. Who should hold and disburse the $10,000 deposit, and what should the brokers do if the seller refuses to sign a release?
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The listing broker holds the $10,000 in trust. If the buyers timely rescind under the disclosure statute, the contract terminates and the deposit should be returned to them. The broker should not release the funds to the seller merely because the seller disputes the rescission. The broker should obtain a written release signed by both parties or, if the seller refuses, hold the funds and seek guidance from counsel. In an appropriate case, the broker may file an interpleader so a court decides entitlement.
The brokers should not give legal advice about the validity of the rescission. They should promptly transmit the buyers' written notice to the seller, document the date and method of delivery, and advise the buyers to consult counsel. The buyers should also cancel the appraisal in writing and request a refund if the lender permits. If the seller refuses to release the deposit, the broker should not use the money for commissions or expenses; it remains trust funds until entitlement is resolved.