“Buyer Beware” Is Now “Seller Beware” Under New York Law

Governor Hochul signed a bill that will require real estate sellers to provide with a Property Condition Disclosure Statement starting March 20, 2024 that can expose sellers to potential claims even after closing.

How the Property Condition Disclosure Act Works Now

The Property Condition Disclosure Act (PCDA) states that a seller of residential real property (excluding condos and cooperatives) must provide a buyer with a Property Condition Disclosure Statement (PCDS). This PCDS requires sellers to answer 48 questions that discloses the seller’s actual knowledge of the property, any material defects, etc.

To date, the PCDA included a provision that, when translated into plain English, said, “If you don’t want to fill out the PCDS, you can give the buyer a $500 credit at closing instead.”

But all that is changing.

How the Property Condition Disclosure Act Will Work Starting March 20, 2024 

Starting March 20, 2024, the amended PCDA eliminates the seller’s option of giving a $500 credit to the buyer instead of completing and providing the PCDS to a buyer.

So what information does a seller have to disclose in the PCDS? The seller must answer a lot questions that identify whether the seller is aware of the presence of any of the following:

• Fuel storage tanks

• Asbestos

• Lead plumbing

• Rot or water damage

• Fire or smoke damage

• Termites, insects, rodent infestation

• Known material defects in the footings, beams, girders, etc.

• Flooding, drainage, or grading problems

The PCDS also requires sellers to answer whether they have knowledge of any known material defects to the following systems: plumbing, security, sump pumps, foundation/slab, interior walls/ceilings, exterior walls, siding, floors, chimney/fireplace/stove, patio/deck, driveway, air conditioning, heating system, and hot water heater.

Sellers Will Be Exposed To Liability Even After Closing

So before Governor Hochul signed the new bill into law, sellers did not have to disclose anything about the property but, starting March 20, 2024, due to this massive change in the law that shifts buyers’ obligations onto sellers, all of the above will have to be disclosed. And while that may not seem like a big deal, the new law also states the following:

A knowingly false or incomplete statement by the seller . . . may subject the seller to claims by the buyer prior to or after the transfer of title.

That means buyers can sue sellers after closing. And the statute of limitations on these claims may be as long as six years.

Exemptions To The Property Condition Disclosure Act

The good news is that the PCDA includes several exemptions, one of which includes, “transfer[s] by a fiduciary in the course of the administration of . . . a trust[.]”

What does this mean for you if you plan on selling your home soon? It means that, if you would like the peace of mind of knowing a buyer will lack the ability from holding you liable after closing due to this major change in NY law, all you have to do is transfer your property into a living trust!

What Happens After You Transfer Your Home Into A Living Trust

From a day-to-day standpoint, nothing changes after you transfer your home into a living trust, i.e., you still own the property, you can still use the property exactly as you were before the transfer, you will pay the same property taxes, etc. And, if you have a mortgage on the property, federal law prohibits a lender from declaring the transfer violates your mortgage agreement.

From a legal perspective, transferring your property into a living trust means that, rather than the property being held by you as Jane Doe individually, the deed would read: “Jane Doe, as Trustee of the Doe Family Living Trust.”

Most importantly, when the time comes and you want to sell your property, you will have no legal obligation to provide a buyer with a PCDS because the property is being transferred by “a fiduciary in the course of the administration of a trust” and the law specifically states such a transfer is an exemption to the PCDS requirement.

And because you’ll have no obligation to provide a disclosure statement, you will escape any liability after closing if a buyer attempts to bring a claim based on any aspect of the physical structure of the property.

To help our clients navigate this unprecedented change in New York law, The Donaldson Law Firm is offering a fixed, low, flat rate fee to (1) not only set up a living trust for you and your family, but the fee will also include (2) the transfer of your home into the trust, including county recording fees, so you’ll only pay one fee and we’ll handle the rest for you.

To schedule a free consultation with the team at The Donaldson Law Firm so we can discuss how we can accomplish this for you, please call 914-359-5455 or email us by clicking here. 

Get in touch today and let us help you avoid post-closing liability!