The law in New York surrounding the Property Condition Disclosure Statement (PCDS) changed significantly with Governor Hochul’s recent signing of A.1967/S.5400, which eliminates the option for sellers to offer a $500 credit to buyers at closing in lieu of completing the PCDS and adds questions disclosing the property’s flood history and risk to the PCDS itself.
What is a Property Condition Disclosure Statement?
The Property Condition Disclosure Act, established in Article 14 of the New York Real Property Law, requires sellers of real, residential property to provide a Property Condition Disclosure Statement to a prospective buyer. Real residential property refers to stand-alone homes used as, or intended to be used as, a residence by one or more individuals, and does not include vacant lots, condominiums, coops, or property in a homeowner’s association that is not owned in fee simple by the seller.
A PCDS is a document that provides important information about the condition of a property for sale. It is completed by the seller, then given to the buyer as part of the sales process; both parties must sign the document to acknowledge its completion and accuracy prior to the buyer’s signing of the final contract. A PCDS is a valuable disclosure tool that protects the buyer from unexpected and costly repairs or renovations after purchasing a property.
Who must complete a PCDS?
Until recently, there was a loophole in New York law that allowed sellers to avoid completing a PCDS provided they paid a $500 credit toward the purchase price of the property. This essentially allowed sellers to treat the PCDS as optional, with the $500 credit as the cost of doing business. On September 22, 2023, however, Governor Hochul signed bill A.1967/S.5400, which eliminates the $500 credit option and adds several questions to the disclosure form in order to protect New Yorkers from increasingly frequent and extreme flooding in the state. Therefore, beginning on March 10, 2024, all sellers of residential property must complete a PCDS or be held liable for a failure to do so.
The Property Condition Disclosure Act requires a listing’s real estate broker to timely inform the seller of their obligation to complete and deliver the PCDS to the potential buyer. Furthermore, the buyer’s broker (or the seller’s broker if the buyer is not represented by a broker) is required to inform the buyer of their right to receive the form. Both parties must sign the PCDS prior to the buyer’s signing of the contract.
What does a PCDS include?
A typical PCDS includes information about a property’s age, ownership, drainage, mold history, termite history, shared features of the property, and more. With the passing of A.1967, the New York PCDS will have several new questions relating to the property’s flood history and flood insurance requirements: specifically, whether the property is located in a 100-year or 500-year flood plain according to FEMA’s flood insurance rate maps, whether the property is subject to requirements under federal law to obtain and maintain flood insurance, and the flood insurance history of the property. With the new flood risk disclosure, New York state will empower home buyers with information about the flood risk of their potential property and allow them to have all the information they need to make informed decisions. Sellers must answer the questions themselves and based on their actual knowledge at the time of signing the PCDS. A seller is not obligated to conduct any type of inspection of the property in order to complete the PCDS.
What happens if a seller fails to complete a PCDS?
With the elimination of the $500 dollar credit option, a seller who willfully fails to provide a PCDS to the buyer is liable for actual damages suffered by the buyer, in addition to any other existing equitable or statutory remedy.
The new changes to the PCDS will become effective on March 20, 2024 and will heighten the responsibilities of sellers in the New York marketplace while affording prospective buyers a more comprehensive picture of their potential future home.