New York Governor Kathy Hochul has signed a bill into law amending Sections 462 and 465 of the Real Property Law. Notably, these sections provide the statutory requirement for sellers of residential real property — defined as “one- to four-family dwelling used or occupied or intended to be used or occupied wholly or partly, as the home or residence of one or more persons …” (RPL 462) — to provide a disclosure statement regarding the property or a $500 credit at closing in lieu of such a completed statement.
Unimproved parcels, condominium and coop- erative units or property on a homeowners’ association that is not owned in fee simple by the seller (RPL 462) are excluded from this requirement. Under this new bill (A1967/S5400), sellers will now be required to complete the disclosure statement with no $500 credit option and include items regarding flooding and “water penetration” into the home.
New York Real Property Law 462 codifies the actual statement that sellers must complete to disclose the history of the property to buyers prior to signing a contract of sale. Under the prior version, there were 48 total questions ranging from “How long have you owned the property?” to “Are there any known material defects in … structural systems?”
This new law will add eight more questions to the statement, asking water-related questions such as whether the property is in any FEMA-designated flood zone; whether the seller ever received flood-related assistance from FEMA for the property or if there had ever been a claim for flood damage to the property. The new disclosure will also change the question to ask whether the home has experienced any water penetration or damage due to seepage or a natural flood event (heavy rainfall). Fresh off the large rain storm our area took on September 29, this question will resonate with many homeowners.
Most consequential for sellers is that the new law eliminates the option of the seller provid- ing the buyer with a $500 credit at closing in lieu of completing the statement. Since this disclosure is to be delivered prior to entering a contract, realtors and agents will need to carefully guide their sellers on completing this statement. RPL 465 eliminates limits on liability on the seller. In the past, the buyer’s sole remedy for the seller’s failure to comply with the Property Condition Disclosure Statement was the $500 credit at closing. Under this new law, no existing legal cause of action or remedy is limited, and all options are available to a buyer who was deceived on the condition disclosure form.
New York has long viewed real estate with a caveat emptor approach. This new law signals the burden is now shifting. Sellers must be careful as to how they proceed or face potential litigation long after closing.
This new law is scheduled to take effect on March 20, 2024. It is not yet known whether a transaction must close by then or if that will be the cutoff for new contracts to avoid the requirement. As the rules start to be formulated, we will keep you updated.
Kyle E. Scheiner
Romer Debbas LLP
275 Madison Ave., 8th Floor
New York, New York 10016
(212)888–3100
