PROPERTY CONDITION DISCLOSURE IT'S THE LAW
Effective March 1, 2002, a new Article 14 of the Real Property Law ("Property Condition Disclosure Act") requires the sellers of one to four family residential real property to provide a written statement to prospective purchasers disclosing all known defects relating to the property. Residential Real Property has been defined as real property improved by a one to four family dwelling used or occupied, or intended to be used or occupied, wholly or partly, as the home or residence of one or more persons but shall not refer to (a) vacant land upon which residential dwellings are to be constructed or (b) condominium units or cooperative apartments or (c) property in a homeowner's association that is not owned in fee simple by the seller. Although the statute does not specifically make reference to it, it is suggested that a mixed use property that contains a maximum of four residential units would also be inclusive in the definition of residential real property. It is therefore suggested that a store or stores with one to four residential units above it would come under the disclosure requirement.
Every seller of residential real property is now required to complete and sign the property condition disclosure statement which is to be delivered to a buyer or buyer's agent prior to the signing by the buyer of a binding contract of sale. Please be advised that your binders or offers to purchase should be modified to indicate that the document does not constitute a contract of sale thereby avoiding the need to attach a property condition disclosure to the documents. A copy of the disclosure statement containing the signatures of both the seller and the buyer is to be attached to the real estate contract. Whether or not a real estate broker is utilized in the transaction, a disclosure statement must be annexed to the contract of sale. The statute further indicates that the seller is to complete the form without the assistance of the real estate broker. The 48 questions posed in the disclosure statement are representations made by the seller and not the representations of the seller's agent.
The willful failure to comply with the disclosure act could render the seller liable for actual damages suffered by the purchaser in addition to any other statutory or equitable remedy. The failure of the seller to deliver a property condition disclosure statement to the buyer will result in a credit of $500 against the purchase price at the time of closing.
Certain transactions are exempt from the disclosure requirement which include:
Article 14 also obligates the listing broker to timely inform the seller of the seller's obligation under this article. A buyer's agent and the selling broker (the agent representing a seller and dealing with the prospective buyer) shall inform the buyer of the buyer's rights and obligations under this article. Upon the performance of his/her duties and obligations imposed by the statute, the agent shall have no further duties under the article and shall not be liable to any party for a violation of the article. Most importantly, the real estate licensee should be fully aware that the new Article 14 is not intended to and does not limit existing responsibilities by a seller, buyer or agent concerning the condition of the property or potential liabilities or remedies at law, statute or in equity. It is therefore imperative that the agent continue to disclose to the prospective purchaser material defects of the property of which the licensee is aware and that a failure to comply will result in a breach of the agency disclosure as promulgated in Section 443 of the Real Property Law.
A copy of the Property Condition Disclosure Statement may be obtained from your local broker organization or in the alternative, you may contact our offices at (212) 509-9595 for further information. Copies of revised binder agreements will also be made available upon request. The binder or offer to purchase cannot be construed to be a contract because it would require the property condition disclosure to be attached to it and accordingly, subject the seller to the financial penalty for failure to comply.
Capuder Fazio Giacoia LLP