Law Change on Seller Disclosures and Trusts

Written By: Gabe Walsh, IAR Legal Counsel

Scroll below to read the article or watch the Legal Breakdown video here. 


You might remember reading an article I wrote last year which discussed seller disclosures and trusts. In case you haven’t had a chance to read it, you can find it here. The article discussed what I refer to as the ‘trust exemption’ in Iowa Code Section 558A, which exempted from the seller disclosure requirements in that code section:

A transfer by a fiduciary in the course of the administration of a decedent’s estate, guardianship, conservatorship, or trust.

The crux of that article, in light of this exemption, can be summarized by posing one simple question here: If a seller has lived in their house forty years, but has that house in their living trust, and goes to sell it – are they exempted from the seller disclosure requirement above simply because the property is held in a trust??

I would be willing to bet that if I asked ten real estate attorneys that question in a room, there would be several opinions on the disclosure duties. This is scary for REALTORS® who have certain disclosure duties themselves under 558A. It is scary for lawyers trying to advise clients on their disclosure obligations in a transaction. This is scary for the public at large buying a house. In other words: this was a big deal.

A bill was recently signed into law by Governor Kim Reynolds, after nearly unanimous bipartisan support in the Iowa House and Senate. It applies to the transfer of real estate as part of the administration of a decedent’s estate, guardianship, conservatorship, or trust on or after July 1, 2020. The exemption has been amended to read:

A transfer by a fiduciary in the course of the administration of a decedent’s estate, guardianship, conservatorship, or trust. This exemption shall not apply to a transfer of real estate in which the fiduciary is a living natural person and was an occupant in possession of the real estate at any time within the twelve consecutive months immediately preceding the date of transfer.

This new language cleans up a lot of the ‘grey’ that was referenced in the question I raised above and in my prior article. The language might not clear up everything. However, it is definitely a change. While this legislative change was pushed by IAR to specifically address disclosure issues with trusts, the new language applies not only to trusts, but a decedent’s estate, guardianship, and conservatorship as well.

There may come a time where a client has a question about how the language of a particular exemption applies to them. Always be mindful that this type of question is a legal question. In this situation, a REALTOR® should always remind clients they are not attorneys and that the client should seek the advice of a lawyer of their choosing to get legal advice regarding such questions.  This is not only a good practice, but a requirement under the Code of Ethics of the National Association of REALTORS®. REALTORS® needing advice about their own disclosure obligations may also consider reaching out to private legal counsel.



Disclaimer: Although legal information is provided in this article, the information is general and is not legal advice. Specific factual situations can make a difference in a legal outcome. No attorney client relationship is intended by this article. Contact private legal counsel of your choosing for advice.

A special thank you from the author to our Lobbyist Jen Kingland, Government Affairs Director Jamie Horbach, our legislative committee, as well as REALTORS® across the State for their work on getting this law passed.

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