Caveat Emptor Preempted: The Repeal of the $500 Property Condition Disclosure Credit
A big change is on the horizon for New York City’s real estate! Starting March 20, 2024, a pivotal amendment to the Property Condition Disclosure Act will change how residential properties are bought and sold in the Empire State. Gone are the days of the $500 credit workaround – it’s time for full transparency with mandatory detailed disclosures, including flood history. What does this mean for sellers, buyers, and real estate professionals? Dive into our latest post to discover how this legislative update will reshape how NYC real estate transactions close and why partnering with the right title insurance company is important. Stay ahead of the curve!
Insight / Keeping it Real (Estate)
On September 22, 2023, Governor Hochul signed legislation amending the Property Condition Disclosure Act (PCDA). The amended legislation repeals the section of the law allowing the payment of a $500 credit to comply with the PCDA. Effective March 20, 2024, this amendment to the Property Condition Disclosure Act (PCDA) is set to transform the process of buying and selling residential property in our state.
Since 2002, the PCDA has mandated sellers to provide a comprehensive disclosure statement about the property’s condition to buyers. This practice aimed to ensure transparency and protect buyers from potential defects unknown at the time of purchase. However, a common workaround—a $500 credit in lieu of the Property Condition Disclosure Statement (PCDS)—has been repealed. The 2023 amendment eliminates this option, compelling sellers to fully disclose property conditions, including its flood history and whether it’s situated in a designated flood zone.
For decades, the $500 credit served as almost a bypass for detailed disclosures, with many in the industry viewing it as a simpler, albeit less informative, route. Not providing a PCDS was so ubiquitous that many real estate attorneys in New York City issued contracts that incorporated the $500 credit as a given. It is likely that over the last twenty years, the vast majority of real estate attorneys have seen more presidential elections than PCDS’.
The 2023 amendment removes the language in the PCDA that requires sellers of residential property to provide a $500 credit to a purchaser in the absence of the statement. Additional amendments add questions regarding the property’s flood history and whether it is in a designated flood zone. The concern for sellers in completing a PCDS is the potential for liability under various causes of action, such as fraud or fraudulent misrepresentation and breach of contract. Willful misstatements in the PCDS (or questions as to whether a reasonable seller would have known about a potential defect) may now lead to litigation that will bring home sellers and buyers into court even years after closing. The repeal of the $500 credit amendment emphasizes the need for accuracy and thoroughness in property disclosures.
New York City’s real estate scene constantly evolves – in this case with changing regulations affecting how deals close. Adapting to changes requires foresight and the right partnership. Title insurance companies are more than just service providers; they are essential allies in navigating the complexities of NYC’s dynamic real estate market. For real estate professionals looking for a partner to help navigate through new regulations, partnering with a trusted title insurance and closing agency is a crucial step towards staying ahead of the curve.
If you have any questions about closing real estate transactions or if you would like to discuss an upcoming or prospective transaction, please contact us. Our team is ready to provide you with the expertise and support you need in this changing landscape.