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Real Estate Quarterly

A Quarterly Newsletter for Real Estate Professionals

April – June 2024

Amendment to Property Condition Disclosure Act Removes Seller’s Opt-Out and
Adds FEMA Questions

In 2001, the Property Condition Disclosure Act (PCDA) became law for the purpose of providing property condition information to home buyers. This is accomplished by requiring sellers to complete a Property Condition Disclosure Statement (PCDS) containing a series of mandated questions to which a seller can respond by choosing “yes,” “no,” “unknown,” or “n/a.” Sellers need only to provide information based on their actual knowledge of the property at the time of contract are not required to undertake any inspection or investigation or to check the public records. To be clear, the information provided on the PCDS is based on actual knowledge and not what we think a seller should know about the property.

Both the PCDA and the PCDS are careful to caution buyers that the form is not a substitute for the buyer’s inspections or tests and does not constitute a warranty of any kind. In fact, buyers are strongly encouraged to hire a home inspector and to check the public records. While the PCDA obligates sellers to revise the PCDS right up to closing when they acquire knowledge that renders any statement in the PCDS inaccurate or untrue, the obligation to learn about every condition present in the home at the time of contract remains with the buyer. Indeed, New York has historically been a caveat emptor, or “buyer beware,” state.  

The PCDA was designed to encourage sellers to share information about the property without eliminating the buyers’ obligation to conduct inspections and investigations. Nevertheless, the original law provided sellers with a way to “opt out” of providing the PCDS to a buyer by giving the buyer a $500.00 credit at closing. A fair number of attorneys advised their clients to do just that, believing that the questions on the PCDS are vague or difficult to answer, opening their clients up to liability and possible lawsuits post-closing. 

In September 2023, the PCDA was amended by the New York State Legislature and signed into law by Governor Hochul. The changes under the new law when into effect on March 20, 2024, meaning that contracts on residential real property signed after this date must be accompanied by the new PCDS. The exceptions to the law and many of its provisions have not changed, but the amendment is significant and worthy of discussion.

The amended PCDA still permits a buyer to recover damages under any applicable law, in statute or in equity; however, it has eliminated a seller’s ability to give a buyer a $500.00 credit in lieu of providing a PCDS. While the law requires the seller to deliver a PCDS to a buyer, it does not address the liability of a seller who fails to do so. Under pre-amendment rules, the buyer was entitled to a $500.00 credit at closing. That is no longer the case. The amended PCDA specifically allows a buyer to recover damages against any seller who 1. provides an incomplete or false PCDS or 2. provides a false revised PCDS, or 3. fails to provide a revised PCDS. Notice that the law holds a seller liable for failing to provide a revised form, but does not specifically address liability for a seller’s failure to provide a fully completed PCDS at the time of contracting. Can a seller now refuse to provide a PCDS without giving the buyer a $500.00 and have no liability? The law is not clear; however, allowing a seller to willfully refuse to provide the form without penalty does seem to run contrary to the intent of the amendment. The question will be answered by the courts or via another amendment to the law that clarifies the issue.

The new PCDS has modified and/or added several questions related to water and flooding. For example, the former PCDS had this question: “Does the basement have seepage that results in standing water? That was replaced with this new question: “Has the structure(s) experienced any water penetration or damage due to seepage or a natural flood event, such as from heavy rainfall, coastal surge, tidal inundation or river overflow.”  The former question inquires about a current condition, while the new question inquires about past and present conditions. Historically, most courts have held that property conditions requiring repair need not be disclosed to a buyer if the repair remedied the issue.  

In addition, the amended PCDA has several new questions about whether the property is located in a FEMA designated floodplain, flood hazard area, or wetland, whether the current or previous sellers have ever received FEMA assistance for flood damage, whether flood insurance is required, or if a claim for flood damage has ever been filed by the seller. There has been some debate and pushback over the new questions and reasonable concerns have been raised. From a seller’s perspective, more questions equate to more chances of making a mistake on the form. Moreover, are the FEMA maps current and available? How reliable are they? How much of the property, if any, is located in a flood hazard area? Should a claim filed decades ago have any bearing on the current transaction when the damage was repaired and has not been an issue for the seller? 

If the intent of the legislature was to discourage sellers from giving the $500.00 credit at closing in lieu of providing a PCDS, why not increase the credit to the buyer from $500.00 to $1000.00 or more? By removing the option, has the legislature stepped too far into the right of the parties to contract and come to terms that are acceptable to both seller and buyer? Can the parties agree to a credit in lieu of a PCDS in light of the amendment specifically removing that option?

For now, there are more questions than answers and we will have to monitor court decisions as they are rendered and future amendments as they are passed. It is clear that the PCDA, while well intended, is not clear at all and has raised more questions than answers. Sellers may be anxious when completing the form for fear of answering incorrectly or inaccurately. As a result, more of the questions on the PCDS may be answered with “unknown.” With the tendency of buyers to waive their right to a home inspection, they may be inclined to use the PCDS in place of a property inspection rather than in addition to it. Buyers who waive their right to inspections – a risky choice that has become popular since the onset of the COVID-19 pandemic – do so at their own peril, and it is something that both the PCDA and PCDS still strongly caution against.   

– Jacqueline A. Carosa, Esq.

Relin Goldstein and Crane - Waiving Home Inspections