Sellers Beware - New Laws Affect Sales of Residential Property

Governor Hochul has signed into law a bill that will have significant implications for sellers of residential real property. The new law, effective on March 20, 2024, modifies existing law relating to a seller’s obligation to disclose any information prior to selling residential real estate in New York State. Prior to 2002, most transactions proceeded under the assumption of “caveat emptor,” meaning “buyer beware.” A purchaser was expected to conduct its own due diligence and inspections regarding its purchase of property. In 2002, Article 14 of NY Real Property Law, Sections 462-467, was enacted and introduced the Property Condition Disclosure Statement (PCDS) which applies to the sale of a one to four family dwellings.

The PCDS contains questions regarding the ownership and history of the property, the structural condition of the property, the electric, plumbing and heating systems in the home, as well as any known environmental issues with the property. The PCDS is required to be furnished by a seller to a purchaser prior to a purchaser signing a binding contract for the purchase of the property. A significant aspect of this law was that the Seller could elect not to complete the PCDS, and in lieu of completing this statement, could provide a $ 500.00 credit to the purchaser upon closing of title. Virtually all sellers selling property in this downstate area have elected to give the credit.

The new law has two significant changes. First, the PCDS has been expanded to include additional questions relating to the location of the property in a flood zone, requirement for flood insurance, the history of the property relating to flooding, and history of flood insurance claims. Most importantly, the new law eliminates the option of a seller to elect not to deliver the PCDS and to give purchaser a credit for $ 500.00 at closing. Therefore, a Seller must complete and deliver the PCD’s.

This new law will have significant implications for sellers of residential real properties covered by the statute. Historically, sellers could rest easy knowing that any liability would not extend beyond the transfer of title to the property unless there was a specific obligation under the contract to survive closing. This is no longer the case. A seller must approach the sale of such property with more caution and diligence. A knowingly false or incomplete PCDS by the seller may subject the seller to claims by a purchaser both before and after the transfer and closing of title.

This law should not in any way eliminate a purchaser’s responsibility to conduct its own due diligence prior to entering into a contract to purchase real estate. Nonetheless, the new law will change the way residential real estate transactions are handled.