A Guide to Recent Changes to the Property Condition Disclosure Act for Purchasers and Sellers of Residential Real Property
On September 22, 2023, Governor Hochul of New York signed into law an amendment to the Property Condition Disclosure Act (PCDA), affecting sellers’ property disclosure obligations regarding the sale of 1-4 family residential real estate properties.
Mandatory Property Disclosure Requirement
As of March 20, 2024, sellers must provide purchasers with a completed property disclosure in accordance with Section 462 of the Real Property Law before signing a contract to purchase residential real estate property. Notably, the requirement does not apply to co-ops, condos and property located in HOAs that are not under fee simple ownership.
Per the newly amended law, a seller is no longer allowed to opt out of property disclosure requirements by providing a $500 credit to the buyer at closing. However, the property disclosure must be based on the seller’s actual knowledge, without imposing an affirmative duty to investigate the property.
Expanded Disclosure Requirements
The amended PCDA also introduces additional questions that sellers must address in their property disclosures. Notable additions include inquiries about the property’s location in 100-year or 500-year floodplains according to FEMA’s flood insurance maps, as well as federal law requirements for flood insurance, and the property’s flood insurance history.
Liability for Non-Compliance
Sellers who do not provide a property disclosure statement or fail to provide a revised property condition disclosure statement will only be liable for willful failure to comply with the PCDA requirements. This liability is limited to actual damages suffered by buyers alongside existing statutory or equitable remedies.
Legislative Rationale and Consumer Protection
The legislative purpose is to inform potential homeowners of increasing flood risk attributed to accelerating climate change conditions. While the original PCDA addressed various property concerns, including structural and legal issues, legislatures deemed it outdated and ineffective.
The amendment seeks to rectify this by eliminating sellers’ option to provide a $500 credit to buyers instead of property disclosures, a practice seen as detrimental to consumer protection: The $500 credit became the default choice for most, if not all, sellers because it limited their liability.
Implications and Legal Questions
The amended legislation appears to raise some legal uncertainties, such as not directly addressing whether parties can agree to waive the Property Disclosure requirements. Likely, there will be in-depth discussions and analyses of the language in the future.
Financial Impact on Buyers
Buyers are likely to face increased transactional costs because since they will no longer receive a PCDA credit to offset the expenses of hiring a professional inspector. Hiring one regardless of the PCDA disclosure is generally the better practice since the PCDA does not impose on sellers the affirmative obligation to investigate their property prior to answering the PCDA disclosure and the sellers can also choose “unknown” as an answer.
