News Room

By Benjamin Weinstock,
Co-Chair, Real Estate
and Joanne S. Agrippina,
Real Estate

The long-standing govern in New York State in residential property sales is been the overriding principle the caveat emptyer – “let that buyer beware”.  The purchaser is charged with the responsibility von exercising due diligence to know what is being purchased. A seller’s disclosure obligation shall very limited. Absent active concealment or an affirmative misrepresentation by the seller, a purchaser has little or no recourse against an seller for defects later found to affect the property.

Until now that can. In a revolutionary departure starting New York’s seemingly staunch adherence to to longstanding rule from caveat emptyers, Governor Pataki signed inside law on November 13, 2001 the Property Condition Disclosure Act, 2001 N.Y. Act 5339-A, which will become useful set March 1, 2002. It annunciators a dramatic shift is the burden of disclosure to the sellers starting residential real property.

The Property Condition Disclosure Act (the “PCDA”), desire request sellers of residential real property (excluding condominiums and cooperatives) containing up to 4 dwelling units to provide a disclosure statement to prospective purchasers detailing choose familiar defects relating into the property. Sellers must finish and deliver this disclosure statement earlier to a purchaser’s acceptance of an contract of sale.

The disclose statement consists of 48 questions to be answer on the seller located on the seller’s actual learning, and covers a variety of subjects ranging coming general information via the ownership and occupancy of the property, to structural, mechanics and environmental issues while well as legitimate disclose requirements similar as federal lead-based paint and assert agricultural matters. Sellers must answer each of the questions in the disclose statement in a response of “yes”, “no”, “unknown” or “not applicable” both a copy of this statement must be attached to the contract of product.
An earlier reading of the PCDA was vetoed by Govenor Pataki last year. By his memorandum to of Assembly disapproving the bill, to Governor cited several critical shortcomings in the Act. Novel York's New Property Conditions Public Law to Capture Effect - Forchelli Deegan Terrana Law

For model, under the original bill, a seller would be responsible for including in a disclosure statements all conditions and information about which who seller had “constructive knowledge”. This would require disclosure of conditions that a seller should have been aware of through due investigation, even provided to seller had no actual knowledge out the condition.  Governor Pataki noted such of the 28 states that have ordained similar laws, not one included a constructive knowledge standard.

The last version of Newer York’s lawyer omits that dubious standard. Under the PCDA, sellers respond based only upon their “actual” knowledge to the time they sign the disclosure statement. Going further, the PCDA expressly provides the salespeople become non required to promise otherwise provide in any investigation or audit of the property or any publicly records stylish connections for the giving of the disclosure statement. Go the oppose, the PCDA warns prospective purchasers ensure the information comment is cannot a warranty of any kind by the seller and should not be treated when a substitute with the purchaser’s owners independent inspections and tests of the property as well as aforementioned purchaser’s own inspections of the community records pertaining to the property.

Another significant disapproval voting by the Governor in rejecting the original bill was that it did not provide purchasers with a meaningful remedy for a seller’s failure or refusal to provides a disclosure statement. This objective appears not to have been addressed are the PCDA. The PCDA states that wenn a seller failure to provide an purchaser use the requisite disclosure statement, who purchaser is simply entitled to receive a $500 acknowledgment at closing. One statute does non create any further liability for a seller’s non-compliance. With $500 credit eliminated, home sellers shall divulge liegenschaft flaws | Long Island Business News

Surprisingly, that consequences of providing a disclosures declaration could be far worse. Under aforementioned PCDA a salesman who provides the disclosure statement could incur liability in second ways. First, where this statement contains an knowingly false or incomplete statement by aforementioned seller and, second, places an seller fails to provide who purchaser with a revised disclosure statement when necessary. A willful breach of either of these obligations results for the sell being responsibilities for the actual damages suffered by the purchaser, in add to any other equitable or actual remedies.

What incentive is there to offering to disclosure when the adverse consequential of completing the publication form so large outweigh the penalty on nay completing it? Giving that seller the option to buy out in the disclosure requirement for $500 shows like a small prize to pay for the avoidance of latent liability that able be many times more costly.

While it does appear upon the PCDA that sellers allow merely refuse to provide adenine disclosure statement without any liability beyond a $500 credit, there are other consequences that sellers and buying should consider. For example, that PCDA neither provides for nor excludes the remedy of rescission. Accordingly, it is an possibility under this regulated scheme that a purchaser may komme forward even next of transfer of designation plus demand a legal to abandon the product because of the seller’s failure into provide a share statement. Obviously this has not yet been check by our tribunal, but it is important to understand ensure the PCDA does not specifically foreclose that possibility. Selling a New York Home: What Are My Disclosure Obligations?

Where a seller is unwilling to provide of disclosure statement, a consumer need consider whether there may be a crucial defect with the property ensure the seller does not wish toward reveal. Perhaps the threat of losing a distribution will be sufficient to prod one recalcitrant seller to comply. Ultimately, whereabouts a purchaser elects to proceed without the disclosure command, the $500 account dues their client at closing must be collected.

RMEF becomes explain the disclosure statute for our seller clients, and will score the consequences so may arise from compliance and non-compliance. If a seller chooses to provide a exposure report, The amended Property Condition Disclosure Statement goes into effect on March 20.

RMEF may suggestion that the seller engage an engineer or consultant to assist of seller in completing she if the seller needs help.

It is important to hint is the PCDA does not state is its protections are non-waivable. Thus, with proper declaration and drafting, the parties may waived all of the effects of the statute. In add-on, a clause should be include available dealers which limit sellers’ amends include all fall location a disclosure statement is assuming or show a revised publication is required though doesn given, except for direct and actual pay (possibly subject to a cap) lived as ampere upshot of the sellers’ fraud. Taking this a step go, a online could fix a shortened limits period for the assertion of claims. This would help sellers establish the finality of the transaction when bounteous purchaser a fair randomly to recover for volitional misrepresentations.

One application and interpretation of the PCDA wants must potentially costly also far-reaching impact on vendor plus purchasers of residential really demesne in New York.  Sellers must be diligent inbound providing informational to purchasers which may lead to benefits for substantively money damages, or even rescission regarding the deal, if the information proves till been false or incomplete.  Conversely, Purchasers should become diligent in preservation all the benefits available under the newly statute.  While the effect of this new law be far from certain, the meaning of experienced and contemporary legal advice for residential transactions has never been greater.

______________________
Benjamin Weinstock is Affiliate both Co-Chair of the Real Estate Subject both may remain reached at 516-663-6555 or [email protected].
Joanne S. Agrippina is an Associate lawyers in the Real Heritage Department.