Is a Transfer Disclosure Statement Always a Condition Precedent in a California Sale?

In the recent case of Nasey v. Fell Holdings, LLC, the California appellate court answered this issue in the negative because it depends on the terms of the sales agreement.

For decades, appellant Laurence Nasey owned and operated his businesses out of two properties on Fell and Stanyan streets in San Francisco, but in 2020, he lost title to both properties to respondents at a foreclosure sale.

In September of that year, Nasey executed an agreement with certain of the respondents agreeing that he could remain in possession of the properties, pay rent, and would repurchase them in May of 2021 for $10.5 million.

The parties executed several addenda to their agreement, extending Nasey’s deadline to close escrow, ultimately until September 29, 2022.

In December 2023, after Nasey failed to meet that deadline, he brought suit against respondents for declaratory relief.

The trial court twice granted respondents’ motions for judgment on the pleadings with leave to amend, leading to two more versions of the operative complaint, but in September 2025, the trial court again granted judgment on the pleadings to respondents, this time without leave to amend.

Nasey argued that the subsequent judgment dismissing respondents from the action was in error with respect to each of his four causes of action for declaratory relief because: (1) respondents’ failure to provide him with certain disclosures under Civil Code section 1102 was a condition precedent to his performance under the agreement, (2) respondents’ failure to make any disclosures regarding the properties under Health and Safety Code section 25359.7 was likewise condition precedent to his performance, (3) he had a right to conduct an environmental assessment of the properties in the summer of 2022 in order to satisfy requirements imposed by his lenders, and (4) respondents prevented his performance by exercising their right to refuse to permit such assessment under the agreement.

The appellate court disagreed, and it affirmed the trial court's judgment.

Following the foreclosures, Nasey negotiated with the new owners of the properties to repurchase them and for each of his businesses, Fell Automotive and Stanyan Automotive, to remain in possession of the properties, and pay rent pending close of escrow.

To that end, Nasey and Tabak (on behalf of the sellers) executed, on a preprinted form, an 18-page agreement dated September 14, 2020 and titled “Commercial Property Purchase Agreement and Joint Escrow Instructions” (the agreement or PSA), and simultaneously, a first addendum to it.

Nasey signed the agreement on September 22, agreeing to purchase the properties from sellers for $10,500,000 in cash with a $525,000 initial deposit, and that close of escrow would occur on or before May 31, 2021.

The first addendum was signed by Nasey and Tabak at the same time they signed the agreement (September 22, 2020 and April 30, 2021, respectively). It provided that the following “terms and conditions are hereby incorporated in and made a part of” the agreement: “This Purchase is not subject to any contingencies and is being sold in ‘as is, where is’ condition, with no seller representations” and “The Seller has never lived or operated in either of the Premises, and purchased the Properties at a foreclosure sale.”

At some point in May 2021, the parties executed an “Addendum #2” to the agreement, reducing Nasey’s initial deposit to $285,000 and extending his deadline to close escrow until August 31, 2021. Addendum #2 also amended paragraph 11 of the agreement (“Seller Disclosures”) by providing: “Seller has no obligation to deliver any documents or make any disclosures under the Purchase Agreement.”

And it provided that if there is any conflict between the terms and provisions of the agreement and this Addendum #2, the terms and provisions of this Addendum #2 shall control and prevail

Nasey did not close escrow by August 31, and on September 8, the parties executed “Addendum #3,” extending the deadline for him to do so until December 31, 2021.

After that deadline passed, the parties executed “Addendum #4,” effective January 13, 2022, again extending the deadline, this time until March 31, 2022.

Like Addendum #2, both Addendum #3 and Addendum #4 provided that their terms would “control and prevail” over conflicting terms of the original agreement. Addenda #2, #3, and #4 made certain portions of Nasey’s initial deposit “non-refundable and immediately payable to Seller” in the event that Nasey failed to cancel the contract or vacate the properties by the deadline to close escrow.

Both Addenda #3 and #4 contained an acknowledgment by Nasey that “As of the date of this Addendum . . . Buyer acknowledges that Seller has performed all of its obligations and is not in default of any other provisions in the Agreement, and no claims exist against Seller.”

In February and March 2022, disputes arose between the partes regarding the [agreement], a pair of unlawful detainer actions that had been filed by the non-existent entities ‘Fell Holdings LLC’ and ‘Stanyan Holdings LLC’ with respect” to the properties, and Nasey’s “continuing occupancy” of them.

On December 29, 2023, Nasey filed the instant action in San Francisco Superior Court, naming as defendants the respondents here (save Willow Branch RE Holdings, LLC), as well as his son and daughter-in-law.

His complaint brought a single cause of action for declaratory relief, with two “counts”: the first seeking a judicial declaration that he “was entitled to an appropriate extension of the time to close escrow sufficient to obtain the Phase II assessment and perform any follow-up reasonably required by Nasey or his lenders”; and the second that “he [was] not in breach” of the agreement and “that his duty to perform was suspended by the refusal of [sellers] to allow a Phase II assessment.”

On December 12, Nasey filed a first amended complaint, and on January 14, 2025, respondents filed their answer to it.

On February 7, respondents moved for judgment on the pleadings and after briefing and a hearing, the trial court granted the motion with leave to amend.

On April 23, Nasey filed the operative second amended complaint. It alleged four causes of action, each for declaratory relief.

On May 23 and 27, respondents filed answers to the second amended complaint. On June 11, they moved a third time for judgment on the pleadings.

On August 28, the trial court granted the motion, this time without leave to amend. Judgment dismissing respondents from the action was entered on September 5, from which Nasey filed a notice of appeal.

A judgment on the pleadings in favor of the defendant is appropriate when the complaint fails to allege facts sufficient to state a cause of action. (Code Civ. Proc., § 438, subd. (c)(1)(B)(ii).) A motion for judgment on the pleadings is equivalent to a demurrer and is governed by the same de novo standard of review. All properly pleaded, material facts are deemed true, but not contentions, deductions, or conclusions of fact or law.  Courts may consider judicially noticeable matters in the motion as well.

Code of Civil Procedure section 1060 provides in pertinent part that declaratory relief is proper as to a contract in cases of actual controversy relating to the legal rights and duties of the respective parties.

That said, a trial court may properly sustain a general demurrer to a declaratory relief action without leave to amend when the controversy presented can be determined as a matter of law.

A declaratory relief claim is subject to general demurrer where it relates to a substantive claim that is invalid as a matter of law.

Civil Code, section 1102.3 provides in relevant part that the seller of any single- family real property subject to this article shall deliver to the prospective buyer a completed written statement making certain disclosures in the case of a sale, as soon as practicable before transfer of title. 

Section 1102, subdivision (a) makes the requirement to provide the disclosure statement applicable to any transfer by sale of any single- family residential property, and section 1102, subdivision (b) adopts a definition of single-family residential property from the Business and Professions Code as real property improved with one to four dwelling units.

Section 1102.2, subsection (k) provides that this article does not apply to sales or transfers of any portion of a property not constituting single-family residential property.

And section 1102, subdivision (c) further provides that any waiver of the requirements of this article is void as against public policy.

The operative complaint alleged that respondents never provided Nasey with a disclosure statement pursuant to section 1102 with respect to the properties.

Nasey argued that such disclosure was required because the properties were “improved with one to four dwelling units” (§ 1102, subds. (a) & (b); Bus. & Prof. Code, § 10018.08) and that any purported waiver of the requirement in the agreement or its addenda was void as against public policy (§ 1102.2, subd. (k)). 

He then briefly argued that delivery of the TDS is a nonwaivable condition precedent to his performance under the contract, that respondents’ failure to provide it suspended his duty to perform the agreement.

Even assuming—without deciding—that disclosure under section 1102 was required as to the residential portions of the properties (§ 1102.2, subd. (k)) and that any waiver of such requirement was void as against public policy (§ 1102, subd. (c)), the appellate court did not agree that provision of such disclosure was a condition precedent to Nasey’s performance under the agreement.

A condition precedent is one which is to be performed before some right dependent thereon accrues, or some act dependent thereon is performed.

The existence of a condition precedent normally depends upon the intent of the parties as determined from the words they have employed in the contract.

Absent language that clearly indicates an intention either to create a condition or a promise, whether a particular provision is deemed to be a condition as opposed to a promise is to be gleaned from the intent of the parties as determined by considering the contract as a whole.

In general, the rule is that provisions of a contract will not be construed as conditions precedent in the absence of language plainly requiring such construction.

Instead, whenever possible the courts will construe promises in a bilateral contract as mutually dependent and concurrent.

Conditions precedent are not favored by the law, and are to be strictly construed against one seeking to avail itself of them.

Here, nothing in the plain language of the agreement suggested that Nasey’s obligation to close escrow was “subject to” or “conditioned on” sellers providing him a transfer disclosure report.

Instead, the agreement provides that the close of escrow “shall occur on . . . or before May 21, 2021,” language that courts routinely construe as mandatory.

As noted, the agreement does provide that the seller shall “make any and all other disclosures required by law,” and that “Buyer’s acceptance of the condition of, and any other matter affecting the Property, is a contingency of this Agreement as specified in this paragraph [16] and paragraph 18B. 

Paragraph 18B sets out a timeline for Nasey to review the disclosures and reports for which sellers were responsible, and “Deliver to Seller a removal of the applicable contingency or cancellation.”

By the agreement’s plain terms, it is buyer’s approval of the properties’ condition that is the contingency, not any delivery by sellers of a transfer disclosure statement. And under paragraph 18 of the agreement, Nasey’s remedy in the event such disclosure was not made was cancellation of the agreement, not an indefinite extension of the timeline for him to inspect the properties, approve their condition, and remove the contingency.

 In any event, the first addendum provides that the agreement “is not subject to any contingencies,” and that the properties were “being sold in ‘as is, where is’ condition, with no seller representations,” terms that must prevail over the boilerplate terms of the preprinted form.

Separately negotiated or added terms are given greater weight than standardized terms or other terms not separately negotiated.

Add to all this, in May 2021, the parties executed a second addendum, expressly agreeing that sellers “ha[d] no obligation to deliver any documents or make any disclosures under the Purchase Agreement,” and that in the event of conflict between that addendum and the original agreement, “the terms and provisions of this Addendum #2 shall control and prevail.”

In September 2021, and again in January 2022—long after any deadline for the sellers to deliver a transfer disclosure statement had come and gone—the parties executed two further addenda affirming that “As of the date of [this addendum], Buyer acknowledges that Seller has review of a “current preliminary title report” and “any other matters which may affect title.”

Nasey’s argument that the entirety of his performance under the agreement was nevertheless conditioned on sellers’ provision of a transfer disclosure statement founders on the plain language of the agreement and its addenda.

After sellers’ deadline to make the disclosures had passed, the parties executed additional addenda agreeing that sellers had no obligation to deliver any documents or make any disclosures under the Purchase Agreement” and had performed all of their]obligations and are not in default of any other provisions in the Agreement, and then that those terms should control and prevail over the original agreement.

In sum and in short, the appellate court concluded that sellers’ obligation to provide the transfer disclosure statement was not a condition precedent to Nasey’s obligations under the contract,

LESSONS:

1.         Code of Civil Procedure section 1060 provides in pertinent part that declaratory relief is proper as to a contract in cases of actual controversy relating to the legal rights and duties of the respective parties.

2.         Civil Code, section 1102.3 provides in relevant part that the seller of any single- family real property subject to this article shall deliver to the prospective buyer a completed written statement making certain disclosures in the case of a sale, as soon as practicable before transfer of title.

3.         A condition precedent is one which is to be performed before some right dependent thereon accrues, or some act dependent thereon is performed.

4.         The existence of a condition precedent normally depends upon the intent of the parties as determined from the words they have employed in the contract.

5.         Absent language that clearly indicates an intention either to create a condition or a promise, whether a particular provision is deemed to be a condition as opposed to a promise is to be gleaned from the intent of the parties as determined by considering the contract as a whole.

6.         Separately negotiated or added terms are given greater weight than standardized terms or other terms not separately negotiated.