A buyer's agent is representing a client interested in purchasing a property located within a Mello-Roos Community Facilities District (CFD). The property is subject to a special tax levied by the district. Which of the following statements regarding the Mello-Roos disclosure is most accurate for a California real estate transaction?
- AThe buyer has a 3-day right of rescission after receiving the Mello-Roos disclosure.
- BThe Mello-Roos lien is typically recorded, and the seller must disclose its existence.
- CThe Mello-Roos disclosure is optional if the special tax is less than $100 per year.
- DThe seller is obligated to provide a Good Faith Estimate of the special tax amount to the buyer.
Show answer & explanationAnswer & explanation
Correct answer: B. The Mello-Roos lien is typically recorded, and the seller must disclose its existence.
In California, properties subject to Mello-Roos community facilities district special taxes are considered a material fact. The existence of a Mello-Roos lien is typically recorded with the county recorder, and the seller has a statutory obligation to disclose this to the buyer, usually through a Mello-Roos Community Facilities Act disclosure form, as it impacts the property's financial obligations.
Why the other options are wrong
- A. There is no statutory 3-day (or any specific) right of rescission specifically for Mello-Roos disclosures in California real estate transactions, unlike some other disclosures (e.g., Natural Hazard Disclosure for certain events). The buyer's ability to rescind would typically fall under general contract contingencies or if the disclosure revealed a material fact that makes the contract unconscionable.
- C. The disclosure of a Mello-Roos lien is mandatory regardless of the annual tax amount; there is no de minimis exception.
- D. While the amount is important, the primary obligation is to disclose the *existence* of the tax and provide the official notice, not just a good faith estimate. The official notice will contain the specific amount.
Mello-Roos Disclosure (CA)
Mandatory disclosure in California for properties located within a Community Facilities District (CFD) that levies special taxes to finance public services or infrastructure.
- Required by California Civil Code.
- Discloses special taxes for Mello-Roos CFDs.
- Taxes are liens on the property, similar to property taxes.
- Disclosure must be provided by seller to buyer.
Memory trick: Mello-Roos means 'More Money' for 'Recorded Obligations' – it's always 'Disclosed'.