Property condition a required disclosure
Lance Evans
Last month I wrote about the agency disclosure form that New York state mandates all real estate agents present to buyers and sellers of one-to-four family homes, condominiums or cooperative apartments. This is a licensing obligation.
Another required form is the Property Condition Disclosure Statement. Since March 1, 2002, every seller of one-to-four-family residential housing, whether working with an agent or selling it themselves, has been required to provide a completed property condition disclosure statement to potential buyers. The form is mandated in New York State Real Property law. It may not be altered or amended since it is set by statute.
The form is filled out by the seller based on his or her knowledge of property. It is not a warranty of any kind by the seller or by an agent representing the seller in the transaction. The seller is asked to complete the form themselves and answer all questions based upon actual knowledge. There are opportunities throughout the form to check “N/A”(non-applicable) if the item does not apply and “UNKN” (unknown) if the seller does not know an answer.
It is not a substitute for any inspections or tests that normally occur in the transaction. The buyer is encouraged to obtain his or her own independent professional inspections and environmental tests and also should check public records pertaining to the property.
A completed form must be provided to the buyer or buyers prior to them signing the purchase offer for the property. A copy is included with the signed contract.
While the seller completes the disclosure form without assistance from a real estate agent, agents do have certain duties under the law. These include agents educating their seller or buyer clients about the law and agents educating their customers. Many agents provide the blank form to their seller and will put a completed copy of it in the property file. This helps agents working with a buyer obtain a copy easily.
The form contains questions about the structure and property such as length of ownership, age and who else may have legal access to any or all of the property. It asks environmental questions regarding petroleum products and hazardous or toxic substances that the owner knows to have been spilled, leaked or otherwise been released on the property or from the property onto any other property.
There are questions about structural issues such as water or fire damage, pest infestation, and the roof and foundation. There is a section that covers mechanical systems and services including water, power, and sewage services, and material defects in a variety of items in the house and on the property.
At the end of the form the seller signs a statement that the information is true based on actual knowledge as of the date signed. The seller can update the form if something changes or he or she finds out more information.
So what happens if the seller fails to provide the completed form to the buyer? The law says that if the seller fails to provide the buyer with the Property Condition Disclosure Statement “prior to the signing by the buyer of a binding contract of sale, the buyer shall receive upon the transfer of title a credit of $500 against the agreed-upon purchase price of the residential real property.”
There are some exemptions to the law. It does not apply to new construction, condominiums, or and co-op apartments. In addition, if an estate is selling a property or a bank is selling a foreclosure property, no form is required. There is an exemption for property transferred as part of a settlement due to divorce, annulment, or legal separation or when the property is turned over to another co-owner of the property, or to a spouse or relative from a common ancestor, such as a parent, grandparent, child or grandchild.
I will continue the discussion on forms sellers and buyers may see in a real estate transaction next month.
Lance M. Evans is the executive officer of the Jefferson-Lewis Board of Realtors and the St. Lawrence County Board of Realtors. Contact him at levans@nnymls.com. His column appears monthly in NNY Business.
