FREE HOME INSPECTION
The New York legislature created the Property Condition Disclosure Act (the PCDA), which went into effect on March 1, 2002. As a result of the Property Condition Disclosure Act, a New York home seller is required to disclose certain property conditions or face potential liability for failure to disclose. A home seller has the option to pay $500 to the home buyer at closing in exchange for the property condition disclosure. It is common knowledge that most home sellers in New York prefer not to complete the property disclosure statement and in exchange pay the home buyer $500 at closing. Depending on the Home Inspector fee, a home buyer can use $500 to offset the Home Inspector fee, in effect realizing a substantial discount or possibly a free home inspection. Without a voluntary property condition disclosure from the home seller, the importance of a licensed and qualified home inspector becomes more obvious.
WHO MUST MAKE DISCLOSURES
The PCDA applies to “residential real property,” which the law defines as a one- to four-family dwelling. The PCDA does not include condominium units, cooperative apartments, vacant land on which the owner intends to build a residence, or property in a homeowner's association that is not owned by the seller. The law applies to contracts for the purchase of “residential real property,” including long-term installment contracts and leases with either an obligation or an option to purchase the property.
Copy of a standard disclosure statement is available on the New York Department of State website, https://www.dos.ny.gov/forms/licensing/1614-a.pdf. The questions are organized by topic:
- general information: age, ownership, utility surcharges and possession of the property
- environmental: whether the property is located within a flood plain, wetlands, or agricultural district, near a landfill; whether the property contains asbestos, lead pipes, or fuel storage tanks; whether a radon test has been performed on the property; or whether petroleum products or hazardous or toxic substances are known to have been spilled, leaked, or otherwise released on or from the property
- structural: water, fire, smoke, or insect damage and the condition of the roof, and
- mechanical systems and services: utilities, water source and quality, sewers, drainage, flooding.
WHO IS EXEMPT FROM THE DISCLOSURE LAW?
A home seller is not required to complete and deliver the disclosure statement for certain types of property transfers that are exempt from the PCDA. The following are exempt:
- transfer ordered by the court in a lawsuit such as a probate, mortgage foreclosure, bankruptcy, legal partition, or divorce
- transfer to your lender to satisfy your mortgage or prevent a foreclosure
- transfer made to distribute the property of a decedent’s estate or trust, or made during the administration of a guardianship or conservatorship
- transfer to another co-owner of the property, or to your spouse or a relative from a common ancestor, such as a parent, grandparent, child or grandchild
- transfer that has not been ordered by a court, but is part of the settlement of a divorce, annulment, or legal separation
- transfer to the state of New York, or any other unit of local government, whether part of a condemnation, or not, and
- transfer of newly constructed property that has never been inhabited.