New York State recently enacted a new law intended to protect those purchasing residential property. Although the law went into effect March 1, few local residents know about the law, known as the Property Condition Disclosure Act (PCDA), which requires the sellers of most one-to-four family residential real estate properties to provide a disclosure statement to prospective purchasers detailing all known defects relating to the property.

The disclosure statement consists of 48 questions, covering a variety of subjects, such as general questions relating to the property; environmental issues; structural issues; and mechanical issues. It must be completed by the seller and delivered to the buyer signing a binding contract of sale. In some instances the disclosure statement may be required to be provided to the prospective purchaser even before a written offer is made. A copy of the disclosure statement, signed by both the seller and buyer, is required to be attached to the contract of sale.

The questions included in the disclosure statement cover a vast amount of topics and are to be answered by the seller with "yes", "no", "unknown" or "not applicable." Sample questions include: How long have you owned the house; How long have you occupied the house; How old is the structure; Does anybody claim to own any part of your property; Are there certificates of occupancy related to the property; Is the property located in a designated flood plain; Is the property located in a designated wetland; Are there or have there ever been any fuel storage tanks above or below the ground in the property; Is there any water damage to the property; Is there any fire or smoke damage; Is there any termite, insect, rodent or pest infestation?

The new law doesn't require a seller to provide any investigation or inspection of the property when answering the questions in the disclosure statement. Therefore, even when a disclosure statement is received from a seller, a purchaser should still have their own inspection conducted by a competent inspector. "[The law] requires the buyer to make certain representations with respect to the condition of the house that they never had to do before," said Jericho attorney Lee A. Schwartz. "These are things that an inspection would not disclose."

The seller does have other options according to the PCDA. "The seller is required to fill out the disclosure statement and if he or she doesn't there is a $500 penalty -the seller has to give a $500 credit at closing," said Schwartz, who explained that attorneys are split with their decisions to complete the statement or pay the penalty. "Some [attorneys] support the statute and say you should comply and some say you should not comply and give the $500 credit. By making any kind of representations as part of the disclosure statements you are opening yourself up to potential litigation."

The PCDA also states that a real estate agent representing a seller as a listing broker is obligated to timely inform the seller of the seller's obligations. An agent representing the buyer, or if the buyer is not represented, the agent representing the seller and dealing with the buyer, has the same duty to inform the buyer of the rights under the PCDA before the buyer signs a binding contract.

According to Schwartz, it is too soon to tell whether this new law will have the intended result and how the statute will be interpreted by the courts. Schwartz is finding 50 percent of people are complying and 50 percent of people are taking the penalty.

Schwartz is a full service, general practice attorney, concentrating in real estate and commercial transactions, trusts and estates and estate administration. Schwartz has nearly a decade of experience representing all types of clients in a wide range of matters including real estate purchases, sales, leasing and financing, corporate and commercial transactions and drafting and negotiating employment agreements, consulting agreements, severance agreements, joint venture agreements, licensing agreements and distribution agreements. Please call Lee Schwartz at 677-9551 for more information on this new law and the certain exemptions that apply.