New Property Disclosure Law Raises a Flood of Questions (pun intended)
A new law went into effect in New York earlier this week, bringing with it changes that could seriously impact residential home sales in the state. The law affects Property Condition Disclosure Statements in residential real property transactions, particularly regarding property flooding and the remedy for failing to provide a disclosure statement. Learn everything you need to know about the new law below, and if you are about to enter into a real property transaction in the Hudson Valley, contact the Law Office of Taran M. Provost, PLLC, in Poughkeepsie for advice and representation from a knowledgeable and experienced New York real estate lawyer.
Property Condition Disclosure Statements: What Hasn’t Changed
Assembly Bill 1967 (A1967/S5400) was introduced on January 23, 2023, and signed into law on September 22, 2023, slated to go into effect 180 days later, i.e., March 24, 2024. The bill amends the Property Condition Disclosure Statement required by the Property Condition Disclosure Act, found in section 462 of the Real Property Law.
First enacted in 2002, section 462 requires the seller of residential property to provide a property condition disclosure statement to the buyer or buyer’s agent prior to the buyer signing a binding contract of sale. The statement is a comprehensive (but not detailed) statement of certain conditions of the property known to the seller. The form includes about 48 yes/no questions on a range of topics related to the property, including:
- Legal claims against the property
- Easements
- Property features shared in common with adjoining landowners or an HOA
- Utility surcharges
- Hazardous or toxic leaks or spills
- Flood-related questions
- Fuel storage tanks, aboveground or underground
- Asbestos
- Lead plumbing
- Water damage or rot
- Fire or smoke damage
- Termite, rodent or pest infestation or damage
- Roof questions (age, warranty, known material defects)
- Structural systems
- And much more
Under the law, providing a knowingly false or incomplete statement may subject the seller to legal claims before or after the transfer of title to the buyer. However, the law makes it clear that the disclosure is not a warranty and not a substitute for inspections conducted by the buyer. Rather, it is merely a statement of certain conditions related to the property that the buyer knows about.
What’s New?
The new law makes two significant changes to the Property Condition Disclosure Statement. The first change is the addition of seven new questions related to flooding, including questions about flood insurance, flood risk, flood damage, flood hazard areas, floodplains, elevation certificates, and more. It is hard to believe much of this information will be within the seller’s knowledge. The seller can always answer “unknown” to a given question, but “unknown” answers can be tricky and lead to litigation down the line if the buyer thinks the seller may have been less than forthright in completing the form. The New York State Bar Association opposed this amendment to the law because of the ambiguous nature of these flood questions and the potential legal risks it could create.
The other major change in the new law relates to the liability of sellers and the remedies available to buyers. A1967 removed the $500 title credit owed to the buyer if the seller failed to deliver the disclosure statement as required. With such a weak remedy, sellers were just skipping the disclosure statement and giving the credit instead, rather than open themselves to liability for making incomplete or inaccurate disclosures to complicated questions, such as the new raft of flood-related disclosures.
Now the title credit is no longer an option, but that was the only remedy in the law. So what is the remedy now for failure to disclose? A1967 changed the title of this section of the law from REMEDY to LIABILITY, and while it removed the title credit, it retained the following language: “Nothing in this article shall be construed as limiting any existing legal cause of action or remedy at law, in statute or in equity.”
As with the previous version of the law, a seller can be held liable for actual damages for willful failure to provide truthful answers on the disclosure statement based on the seller’s actual knowledge. However, this liability only applies to a seller who provides a disclosure statement (or fails to provide a revised statement). What about a seller who never provides a disclosure statement in the first place? With the title credit remedy removed, is there any remedy or liability on the seller for refusing to provide a disclosure? Should a buyer refuse to go through with the purchase if the seller fails to provide the statement? Could the buyer get out of the contract on this basis? It seems this change in the law raises significant questions that are unanswered at present.
Disclosures aside, a real estate purchaser always has a duty to inspect the property or suffer the consequences. Residential real estate contracts are nearly always “as-is,” putting the responsibility on the buyer to discover defects that are within their means to discover. Nevertheless, this “caveat emptor” approach might not necessarily protect the seller from a fraud claim, such as the seller actively concealing a known defect from the buyer. This is a complex and complicated area of the law, and both parties are highly advised to seek legal counsel to navigate their way through this thorny subject.
Contact the Law Office of Taran M. Provost, PLLC, for Help With Your Hudson Valley Real Estate Purchase or Sale
For help with a residential or commercial real estate transaction in the Hudson Valley, call the Poughkeepsie Law Office of Taran M. Provost, PLLC, at 845-675-3243 for practical advice, technical assistance, and professional legal representation at every stage of the deal from negotiations through closing.
