Brokers and Sellers Be Aware: Changes to the New York Property Condition Disclosure Act Effective March 20, 2024 | Tannenbaum Helpern Syracuse & Hirschtritt LLP
We are now just weeks away from the implementation of changes to New York State’s Property Condition Disclosure Statement (PCDS) and residential real estate brokers and sellers of residential real property alike need to be prepared.
Background. The Property Condition Disclosure Act (PCDA) was originally signed into law in November 2001 by then Governor 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 the burden of disclosure on the sellers of residential real property. Under the PCDA, these disclosures are provided in the 48-question PCDS, which sellers are required to complete and deliver to purchasers prior to purchaser’s acceptance of the Contract.
Historically, the PCDA penalizes a seller who elects not to provide a PCDS by imposing that the Seller give a $500 to the purchaser at Closing. As such, many sellers, especially those downstate, chose the $500 credit penalty, rather than providing the PCDS and potentially exposing themselves to liability for any misrepresentations if the answers in the PCDS turned out to be incorrect. The $500 credit offer has been business as usual for sellers for over 20 years. Purchasers have conducted their own due diligence by relying on engineering inspections and negotiating for certain representations from sellers in the contracts.
What’s Changed? With recent flooding events and risk of future flooding in New York due to climate change, New York lawmakers have made three significant changes to the PCDS that are designed to help purchasers make informed choices when purchasing a home. A copy of the legislation found in chapter 484 for of the laws of 2023 is available here.
Specific Changes.
(i) Mold. On December 1, 2022, the PCDS was amended to require sellers to disclose indoor mold history, beginning on June 14, 2023.
(ii) Flood Risk. On September 22, 2023, Governor Hochul further amended the PCDS by (i) requiring Sellers to disclose flood risk information to potential purchasers by adding seven flood related questions to the PCDS, and perhaps most significantly,
(iii) Opt-Out Option. In September of last year, Governor Hochul also removed sellers’ choice to opt-out of delivering the PCDS in exchange for the $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.
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 there is no language obligating the seller to conduct any type of inspection of the property in order to answer the questions on the PCDS. However, as the seller must deliver a completed PCDS to the purchaser prior to executing the Contract of Sale, sellers familiar with the PCDS questions and their proposed responses may be able to expedite the pace of their transactions from offer to fully executed contract.
