Key Changes in Property Condition Disclosure: Understanding New Laws for Sellers
This week we wanted to remind you that on March 20, 2024 (the “Effective Date”), the legislation signed into law by Governor Hochul (A.1967/S.5400 enacted as Chapter 484 of the Laws of 2023) amending relevant Sections of Article 14 of the Real Property Law (Sections 460-467) will take effect and change how many Sellers (and their attorneys) handle the Seller’s obligation to deliver a completed Property Condition Disclosure Statement (“PCDS”) to a prospective Purchaser on certain, covered Residential Real Estate transactions.
One of the most significant changes in the new law is the deletion of the Seller’s option to give the Purchaser a $500.00 credit at Closing in lieu of providing the PCDS to the buyer prior to signing a binding contract of sale. In addition, the PCDS has been further amended to include additional new questions which are designed to disclose Seller’s knowledge related to flood hazard areas, the federal requirement to maintain flood insurance, FEMA assistance for flood damage, current flood insurance, FEMA elevation certificates, and filing of any claim for flood damage with an insurance provider, as well as amplifying the disclosure requirements for water penetration or damage due to seepage into the Premises.
Under Section 462, the obligation to provide the PCDS prior to executing a Contract continues to apply to “Residential Real Property” defined as follows:
“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) unimproved real property upon which such dwellings are to be constructed or (b) condominium units or cooperative apartments or (c) property on a homeowners' association that is not owned in fee simple by the seller.”
Below is a link to the new PCDS Form added to our website to be used as of March 20, 2024, which now includes a total of fifty-six (56) questions for the Seller to answer.
https://www.homeabstractcorp.
Unfortunately, the new legislation neither sets forth clear penalties in the event a Seller fails to deliver the PCDS nor specific provisions as to whether the Parties can agree in their Contract of Sale to waive the Seller’s obligation to deliver the PCDS. What is clear is that the Exemptions set forth in Section 463 remain in effect so if your Seller’s transaction qualifies under one of the following fourteen (14) categories, there will be no requirement for the Seller to deliver the PCDS :
2. A transfer to mortgagee or an affiliate or agent thereof by a mortgagor by deed in lieu of foreclosure or in satisfaction of the mortgage debt;
3. A transfer to a beneficiary of a deed of trust;
4. A transfer pursuant to a foreclosure sale that follows a default in the satisfaction of an obligation that is secured by a mortgage;
5. A transfer by a sale under a power of sale that follows a default in the satisfaction of an obligation that is secured by a mortgage;
6. A transfer by a mortgagee, or a beneficiary under a mortgage, or an affiliate or agent thereof, who has acquired the residential real property at a sale under a mortgage or who has acquired the residential real property by a deed in lieu of foreclosure;
7. A transfer by a fiduciary in the course of the administration of a descendent's estate, a guardianship, a conservatorship, or a trust;
8. A transfer from one co-owner to one or more other co-owners;
9. A transfer made to the transferor's spouse or to one or more persons in the lineal consanguinity of one or more of the transferors;
10. A transfer between spouses or former spouses as a result of a decree of divorce, dissolution of marriage, annulment, or legal separation or as a result of property settlement, agreement incidental to a decree of divorce, dissolution of marriage, annulment or legal separation;
11. A transfer to or from the state, a political subdivision of the state, or another governmental entity;
12. A transfer that involves newly constructed residential real property that previously had not been inhabited;
13. A transfer by a sheriff; or
14. A transfer pursuant to a partition action.
We do expect that this new legislation will give rise to more litigation as parties seek judicial determination on the various questions and uncertainties created by the modifications to the PCDS and Article 14 of the RPL. We will continue to monitor the situation and advise you on any further developments or case law we locate going forward.
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