Selling a home can be a daunting task, especially when it comes to navigating the legal requirements and disclosure obligations involved. In the state of New York, there are specific laws in place that require home sellers to disclose certain information to potential buyers. These disclosure obligations are designed to protect buyers and ensure that they have all the necessary information to make an informed decision about purchasing a property. Failure to disclose certain information can lead to legal disputes, financial loss, and damage to a seller’s reputation. In this article, Eastcoastlaws.com will explore the disclosure obligations that come with selling a home in New York and what sellers need to know to avoid potential legal issues. Whether you’re a first-time seller or an experienced real estate professional, understanding your disclosure obligations is crucial to a successful home sale.
What Is A Property Disclosure Statement In NY?
A property disclosure statement is a document that is typically provided by a seller to a buyer during a real estate transaction. In the state of New York, a property disclosure statement is also known as a Disclosure Form for Buyer and Seller.
This document provides information about the condition of the property being sold, including any known defects, hazards, or other issues that could affect the value or desirability of the property. The purpose of the disclosure statement is to help buyers make an informed decision about whether to purchase the property.
The property disclosure statement in New York is required by law, and both buyers and sellers are legally obligated to complete and sign it. The statement covers a variety of topics, including the property’s structural and mechanical systems, environmental hazards, and any past or current legal disputes related to the property.
It’s important to note that the property disclosure statement is not a substitute for a home inspection or other professional evaluations of the property’s condition. Buyers should always hire their own inspectors and conduct their due diligence before completing a real estate transaction.
New York Sellers’ Duty to Disclose
Early on in the evolution of this legislation, New York courts established exceptions to the “caveat emptor” principle, raising the seller’s potential exposure to the buyer for faults. An unreported flaw may be the responsibility of a seller who has a particular trust relationship with the buyer, such as trustee-beneficiary, guardian-ward, agent-principal, or attorney-client. Also, a vendor who purposefully hid a flaw can be held accountable by the customer for any harm the deficiency resulted in. The seller actively obstructed the buyer’s efforts to inspect the property while being aware of a fault but failing to disclose it. (See Laxer v. Edelman, 75 A.D. 3d 584 (2d Dept. 2010).)
Disclosure Requirements Under the Property Condition Disclosure Act
The New York legislature established the Property Condition Disclosure Act (the PCDA) (N.Y. Real Prop. Law 460-467) to supplement the court’s conclusions. It mandates specific disclosures from home sellers, or they must provide the home buyer a $500 closing-cost credit. In New York, the majority of house sellers, if not all of them, choose to pay the credit instead of completing the statement. Let’s examine what the PCDA disclosure requirements entail for New York home sellers in more detail.
Who Must Make Property Disclosures in New York
The law defines “residential real property” as a one- to four-family dwelling that is either already utilized as a home or residence by one or more people, or planned to be used as such a home or residence, in order to determine which properties are covered by the PCDA. Condominium units, cooperative apartments, undeveloped land on which the owner plans to build a home, and non-seller-owned property in a homeowner’s association are not included in the phrase. (N.Y. Real Prop. Law § 461(5).)
The law is applicable to all contracts for the acquisition of “residential real property,” including long-term installment contracts and leases that contain an obligation or an option to acquire the property in addition to regular purchase agreements.
Types of Disclosures New York Property Sellers Must Make
A copy of the standard form disclosure statement, which is required under the PCDA, is available on the website of the New York Department of State. The disclosure statement’s language, which is taken directly from the law, asks a number of questions regarding the property that are grouped by subject, such as:
- General information: age, ownership, utility surcharges, and possession of the property
- Environmental: whether the property is next to a landfill, in an agricultural area, a flood plain, or a wetland; whether it has asbestos, lead pipes, or fuel storage tanks; Environmental testing has been done on the property, and there are no known spills, leaks, or other releases of petroleum products, hazardous materials, or poisonous substances on or from the land.
- Structural: water, fire, smoke, or insect damage and the condition of the roof, beams, and other such elements, and
- Mechanical systems and services: utilities, water source, and quality, sewers, drainage, flooding.
The disclosure statement also asks you to mark any appliances or structural elements of the property that have known flaws, including plumbing, heating, cooling, hot water, security and other detection systems, walls, sump pumps, flooring, chimneys, patios, decks, and driveways. In the spaces provided on the form, please provide a detailed description of any malfunctioning systems or components. (N.Y. Real Prop. Law § 462.)
Are You Exempt From the Disclosure Law?
There are some types of property transfers that are excluded from the PCDA and do not need you to complete and send the disclosure statement, including the following:
- transfer ordered by the court in a lawsuit such as a probate, mortgage foreclosure, bankruptcy, legal partition, or divorce
- transfer to your lender to satisfy your mortgage or prevent a foreclosure
- transfer made to distribute the property of a decedent’s estate or trust, or made during the administration of a guardianship or conservatorship
- transfer to another co-owner of the property, or to your spouse or a relative from a common ancestor, such as a parent, grandparent, child or grandchild
- transfer that has not been ordered by a court, but is part of the settlement of a divorce, annulment, or legal separation
- transfer to the state of New York, or any other unit of local government, whether part of a condemnation, or not, and
- transfer of newly constructed property that has never been inhabited.
New York Home Seller Need Not Investigate or Hire an Inspector
You are not required by the PCDA to conduct any research, inspect the property, or search public records for information regarding the property prior to submitting the disclosure statement. Just known flaws must be disclosed; no additional research or inspections are necessary.
The disclosure statement’s text serves as a reminder to the buyer that it is not a warranty or guarantee from the seller on the state of the property and is not meant to replace any inspections, tests, or other research that is typically advised for buyers.
Procedure for Completing and Delivering the Disclosure Statement
You must be reminded of your disclosure obligations under the PCDA by the real estate broker, agent, or salesperson who is representing you in the sale of your home. This person is typically referred to as the listing broker, and they will likely provide you with a copy of the standard form disclosure statement. Every unrepresented buyer must also receive this information from the listing broker. Any listing broker who neglects to alert you or the buyer to the PCDA may be held responsible for this breach by both of you.
The disclosure statement must be completed by thoroughly addressing any known flaws in the product in the space provided on the form or on a separate piece of paper that you attach. The certification is then signed, and it is positioned near the bottom of the final page. By signing the form, you certify that all of your responses and any supporting information are accurate and up-to-date as of the date indicated.
Before the buyer signs the final purchase contract, the disclosure statement must be completed and delivered to them. The buyer or the buyer’s agent will typically get the completed disclosure statement from the listing broker. You can give the disclosure statement to the buyer or the buyer’s agent directly if there is no listing broker. The final step is for the buyer to acknowledge receipt and understanding by signing the form’s acknowledgment section. The final, signed purchase contract should include a copy of the form that has been filled out.
Disclosure Statement Revisions and Updates
If you become aware of an error in the original disclosure statement or if you find a flaw in the property after delivering the original, you must deliver an updated disclosure statement to the buyer. However, if the transfer of possession takes place before the closing or on a date other than the closing date, you are not required to update or revise the disclosure statement. (New York Real Property Law 464)
Risks and Penalties For Not Making Required Disclosures
You will be responsible for paying the buyer a $500 credit at closing if you don’t timely complete and send the disclosure statement. (N.Y. Real Prop. Law § 465(1)).
Numerous New York sellers’ lawyers view this relatively light fine as a chance for their clients to opt out of the PCDA by paying the $500 instead of submitting the form, and they see this as a way to reduce the possibility of future responsibility for omissions on the form. Paying the $500 statutory remedy, however, will not shield you from liability under the aforementioned case law caveat emptor exceptions. Hence, before deciding not to fill out the form or not to otherwise reveal a substantial flaw in the property, you should speak with an attorney. Ask the buyer to acknowledge in writing that the $500 credit was accepted in place of the disclosure statement if you choose to give it to them instead of the statement.
If a disclosure statement is timely sent, whether or not it includes a correction or update, you could be held legally responsible for the buyer for “willful failure to perform” the obligations. The term “willful failure to perform” as used in the PCDA has been strictly defined by New York courts. It’s likely that you won’t be held accountable to the buyer for a disclosure statement error unless the error genuinely stops the buyer from learning about the flaw via routine inspections or the problem could not reasonably have been detected during an inspection.
You may be obliged to cover the buyer’s actual losses brought on by the defect if you are found accountable to the buyer for a “willful failure to perform” the PCDA requirements.