Seller Disclosure Laws In Residential Real Estate: What You Need To Know When Selling A Home
Hal D. Coffey is an associate practicing real estate, business, and corporate law at the Pittsburgh law firm of Grogan Graffam, P.C. He may be contacted at email@example.com.
Do you remember that leak in the basement three years ago? How about the little termite infestation in the guest room and hallway? Or the third-floor
toilet that takes two days to stop running, unless you jiggle the handle just right?
Well, if you do remember, or did anything about those types of defects in your residential property, and now you are getting ready to sell, pursuant to the Pennsylvania Real Estate Disclosure law and many similar state-law provisions, you must disclose these defects.
Generally, these disclosure acts set forth the conditions that must be disclosed by a seller prior to entering into an agreement to sell with a buyer. In most cases, the burden of disclosure is triggered by whether the issue in question is a material defect. Therefore, minor issues such as peeling paint, landscaping problems, or light switches that don’t activate any lights may not need to be disclosed.
Several of the disclosure acts codify the particular legal form that must be used to comply with the act. For example, the Illinois Residential Real Property Disclosure Act and the New York Property Condition Disclosure Act both spell out the forms to be used. The New York form in particular is quite voluminous, requiring the seller to answer whether there was asbestos or lead plumbing in the home as well as whether a landfill ever existed on the property.
The Pennsylvania act left the creation of the disclosure form to the State Real Estate Commission. The act outlines a number of requisite areas of concern, including information about the roof, structural problems, electrical system, and legal issues affecting title. This act also imposes an ongoing duty on the seller to update any changes to the disclosure form that are found to be inaccurate.
Most acts allow a seller to make a notation of “unknown” or “not available” for categories where the seller has no knowledge. The disclosure acts also do not impose an affirmative duty on the seller to make specific inquiries into each matter listed on the disclosure document. Rather, the disclosures made must not be false, deceptive, or misleading.
The disclosure acts also exempt certain transactions, including those between certain levels of relatives and transfers by an estate representative. They also allow sellers to amend or revise the disclosure prior to closing or another specified time agreed to by the parties.
Real estate agents are sometimes exempted from any liability on behalf of their clients, so long as they do not participate in any deception or hiding of material defects and provide the disclosures in a timely manner pursuant to the disclosure act. With all that in mind, if a seller does fail to comply with an act by hiding a material defect or failing to disclose a past remedy, the act provides general and specific remedies and courses of action.
The Illinois act provides for actual damages and court costs, as well as attorneys’ fees to the prevailing party when the defendant knowingly violates the act, fails to perform an enumerated duty, or discloses a fact he knows to be false. In the interest of the free alienation of real property, and possibly because statutory damages are available, the Illinois act sets a one-year statute of limitations.
The New York statute provides a unique remedy of $500 in credit toward the purchase price if a seller fails to provide the codified disclosure statement prior to the buyer signing a binding contract of sale. Any further damages are limited to situations where there is a willful violation of the act.
To avoid a breach of your state’s residential property disclosure act, follow these best practices:
1. Keep handy the inspection you had performed when you first purchased the home. This will provide you with an early indication of any preexisting defects in the home that you will want to remedy and will need to disclose when you sell.
2. Keep records of any major repairs that you have done to the house. Ignorance is not a defense. For example, if you had the work done and simply forgot to keep the records from the water-damage restoration work you had done in the basement, you can be held liable for failing to disclose.
3. Before you fill out the disclosure form, consult a realtor who will do a walk-through with you in your home. A realtor will provide a neutral eye and may help you recall a defect or repair you forgot.
4. Again, most statutes do not require any affirmative actions for your own inspection prior to filling out the disclosure (i.e., no need to climb into the crawl space that has never been a problem for you while living there). A good buyer will hire an inspector, who may provide information the buyer may use for negotiation on the contingencies in the contract.
5. Most importantly, you should consult your own state’s residential property disclosure act.