On September 22, 2023, New York Governor Kathy Hochul signed crucial legislation amending Sections 462, 465, and 467 of New York’s Real Property Law (“RPL”), otherwise known as the Property Condition Disclosure Statement Act (“PCDSA” or the “Act”). Changes to the Act shall be effective as of March 20, 2024, and shall apply to those qualifying transactions involving the sale of residential real property entered into on or after such date.
The Property Condition Disclosure Statement Act and its Effects on the Doctrine of Caveat Emptor
The long-standing rule in New York State has been the traditional rule of caveat emptor, meaning “let the buyer beware.” It provides that a seller does not have a duty to disclose information about the property, absent a fiduciary relationship or conduct that concealm cc ent, misrepresentation, or partial disclosure. Under such circumstances, the burden is on the purchaser to conduct necessary inspections to become informed about the conditions of a particular piece of real property
The Act went into effect in 2002, requiring sellers of residential real property to deliver a fortyeight (48) question Property Condition Disclosure Statement (“PCDS”) to the purchasers of such residential real property, prior to such purchaser(s) signing the contract of sale related thereto. However, sellers had the option of providing purchasers with a $500 credit at the time of closing in lieu of providing the PCDS, thus removing sellers’ obligations to disclose all required information contained on the PCDS.
Changes to the Property Condition Disclosure Statement and the Act
Now, pursuant to the recent enacted changes in the Act, the option for sellers to provide a $500 credit to purchasers at the time of closing has now been eliminated, with all qualifying sellers now being required to deliver the PCDS. Furthermore, the new PCDS adds seven (7) new questions involving flood related information at a property. Such additional information required to be disclosed by seller includes if they have ever received assistance from FEMA, the SBA or other government agencies; whether they have ever filed a claim for flood damage to the property; if the structure has experienced water damage due to seepage or a natural flood event; and whether the property is covered by flood insurance.
Another significant change is the amendment of RPL Section 465. The title of this section was changed from “Remedy” to “Liability”. This amendment replaces the language of Section 465 with the identical language of Section 467, providing “nothing contained in this article shall be construed as limiting any existing legal cause of action or remedy at law, in statute or in equity.” NY CLS Real P Section 467. The change provides that sellers may not only be liable for providing false statements or intentional misrepresentations on the PCDS, but may also be liable for willful failure to perform under the Act, which may include partially disclosing or omitting information on the PCDS prior to or after the transfer of title. Such willful failure may subject sellers to liability for actual damages suffered by purchasers in addition to other existing equitable or statutory remedies. This change is notable because it eliminates a statutory remedy for a seller’s failure to provide the PCDS, creating more unknown potential consequences for sellers failing to comply with the Act.
It shall also be noted that another change to the PCDS made in June of 2023 requires the disclosure of indoor mold history at a given property. While seemingly not affecting those sellers willing to provide the $500 credit to purchasers at the time of closing, it should be noted that this information will be necessarily disclosed by sellers when providing purchasers with the PCDS effective March 20, 2024.
Moving Forward
The changes to the Act discussed will require attorneys to review the entire PCDSA to better educate themselves on the changes to the Act and what is required of their clients. Attorneys representing sellers would be wise to review the PCDS with their clients to ensure all required information is being disclosed and no answers are omitted from the PCDS. Despite the changes to the Act and PCDS, Attorneys should still advise their clients purchasing real property of the importance of conducting home inspections prior to entering into contract. While it remains to be seen how future case law will affect sales of residential real property moving forward, we are likely to see additions to contracts of sale for real property being made by Attorneys in an effort to and limit sellers’ obligations and liabilities, to the extent permitted by law. What we can be sure of is that varying interpretations and discussions centered around the aforementioned changes to the Act and the PCDS will continue, likely having extensive impacts on contract negotiations for real estate transactions in New York State for years to come.
