Brokers and Sellers Be Aware: Changes to the New York Property Condition Disclosure Act Effective March 20, 2024

We are now just weeks away from the implementation of significant changes to New York State’s Property Condition Disclosure Statement (PCDS) and sellers of residential real property and their real estate brokers need to be prepared.

Background. The Property Condition Disclosure Act (PCDA) was originally signed into law in November 2001 by then Governor George Pataki. It applies to sellers of residential real property containing up to four dwelling units and requires sellers to provide a PCDS to prospective purchasers setting forth all known defects relating to the property. Sellers of condominiums and cooperatives are exempt from this requirement.

The introduction of the PCDA marked a dramatic shift from the long-standing doctrine in New York of caveat emptor (“let the buyer beware”) by placing a burden of disclosure on sellers of residential real property. Under the PCDA, disclosures are provided via a 48-question PCDS, that sellers are required to complete, and deliver to purchasers, prior to purchaser’s acceptance of the Contract.

Historically, the PCDA penalized sellers that elected not to provide a PCDS by requiring those sellers to give a $500 credit to their purchasers at closing. As such, many sellers, particularly those downstate, chose to give the $500 credit, rather than providing the PCDS and potentially exposing themselves to liability for any misrepresentations if the answers in the PCDS proved to be incorrect. Electing to give a $500 credit has been business as usual for sellers for over 20 years. Purchasers have conducted their own due diligence by relying on their own private engineering inspections and negotiating for representations from sellers in the contracts.

What’s Changed? With recent flooding events and risk of future flooding events in New York due to climate change, New York lawmakers have made three significant changes to the PCDS that are intended to help purchasers make informed choices when purchasing a home. A copy of the legislation found in Chapter 484 of the Laws of 2023 is available here.

Specific Changes.

  1. Mold. On December 1, 2022, the PCDS was amended to require sellers to disclose any indoor mold history, beginning as of June 14, 2023.
  2. On September 22, 2023, Governor Kathy Hochul signed legislation further amending the PCDS as follows:
    1. Flood Risk. Seven new flood related questions were added to the PCDS so that sellers are now required to disclose flood risk information to potential purchasers, and
    2. Opt-Out Option. Sellers can no longer choose to opt-out of delivering the PCDS in exchange for issuing a $500 credit.

Both the flood risk and opt-out changes go into effect on March 20, 2024.

Exemption. Among the exemptions to the PCDA, sales by estates and transfers to a beneficiary of a trust are excluded. For a full list of exemptions, see here.

Now that it can no longer be avoided by giving what is often a ‘nominal’ credit, real estate brokers and sellers should familiarize themselves with the new disclosure form and get a head start prior to listing a property for sale. Property owners must complete the PCDS to the best of their actual knowledge standard. However, a seller who willfully fails to provide a PCDS to a purchaser is liable for actual damages suffered by the purchaser, in addition to any equitable or statutory remedies.

It should be noted that that sellers have no obligation to conduct any type of inspection of the property in order to answer the questions on the PCDS. However, sellers must deliver a completed PCDS to prospective purchasers prior to the execution of a Contract of Sale. As such, sellers and their brokers that are familiar with the PCDS questions, and have their responses ready, may be able to expedite the pace of their transactions from offer to fully executed contract.

Tannenbaum Helpern Syracuse & Hirschtritt LLP has a robust residential real estate practice, and we will be monitoring the effect the new amendments to the PCDA will have on residential real estate sales and practices in New York. Please contact us in connection with your residential real estate needs

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02.09.2024  |  PUBLICATION: Note From The Real Estate Group  |  TOPICS: Real Estate  |  INDUSTRIES: Real Estate

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