California’s New Flipper Disclosure Requirements: What You Need to Know

Let’s break down what this means for your business and how to stay compliant.

The Basics: Who’s Affected?

California Civil Code § 1102.6h applies to you if you’re selling a residential property (1-4 units) within 18 months of acquiring title. If you’ve made any repairs or renovations using contractors during that time, you’ll need to make specific disclosures to your buyer.

The law fits within the existing Transfer Disclosure Statement (TDS) framework under Civil Code § 1102.6, meaning it shares the same exemptions and cancellation rights.

So, if you’re already exempt from TDS requirements (think foreclosures or estate sales), you’re exempt here too.

What You Must Disclose

Here’s where it gets specific. You’ll need to provide:

1) A detailed list of all work performed, including:

• Room additions
• Structural modifications
• Other alterations or repairs
• Any improvements made by contractors you hired

2) Contractor information for any work exceeding $500 (including labor and materials):

• Names of all contractors
• Contact information for each

3) Permit documentation:

• Copies of all permits obtained
• If you don’t have the permits, provide contact info for whoever does (like your contractor or permit expediter)

Why This Matters

Under existing law, sellers already have a duty to disclose material facts affecting property value or desirability. Shapiro v. Sutherland (1998) 64 Cal.App.4th 1534, 1541-1545. 

But AB-968 takes it further by requiring disclosure of the work itself, not just known defects.

Practical Tips for Compliance

Use Licensed Contractors: This should go without saying, but California Business and Professions Code § 7027.2 requires licensing for any construction work valued at $500 or more. 

Using unlicensed contractors isn’t just risky for quality—it’s work you’ll now have to disclose.

Document Everything: Keep copies of:

• All contracts with contractors
• Permits (digital copies are fine)
• Invoices showing scope of work
• Before/after photos (not required, but helpful)

Don’t Try the Owner-Builder Workaround: Some flippers think they can avoid these requirements by pulling owner-builder permits. 

But the owner-builder exemption has strict requirements, including that the property must be your principal residence for 12+ months. 

Be Proactive with Permits: If your contractor pulled permits, get copies immediately. Don’t wait until you’re in escrow to track them down. If permits weren’t pulled for work that required them, you’ve got bigger problems than disclosure requirements.

The Bottom Line

AB-968 essentially codifies what responsible flippers should have been doing all along. If you’re doing quality work with licensed contractors and proper permits, compliance is straightforward. 

If you’ve been cutting corners, it’s time to change your business model.

Remember, these disclosures become part of your TDS package, carrying the same cancellation rights. A buyer who discovers undisclosed work can potentially cancel the transaction and may have grounds for a lawsuit. 

Quality work, proper documentation, and keeping your California LLC or Corporation in good standing are all important aspects of your business if you are in the business of buying, improving, then selling California residential property within an 18-month period. 

Tom Gallagher (858) 926-5797 is a licensed California attorney focusing on real estate matters. For questions about compliance with AB-968 or other real estate disclosure requirements, contact:

Tom Gallagher, Attorney
SBN 246856 |
GALLAGHER KRICH APC
3033 Fifth Avenue, Suite 222
San Diego, CA 92103
| Phone: (858) 926-5797

This article is for informational purposes only and does not constitute legal advice. Consult with an attorney for advice specific to your situation.