Wayne S. Shapiro - Client Bulletin

CLIENT BULLETIN

A Publication From
Wayne S. Shapiro
ATTORNEY AT LAW
111 West Washington Street
Suite 1028
Chicago, IL 60602
Phone: (312) 704-8400 FAX: (312) 704-0366
e-mail: honstlawyr@aol.com

NEW DUTY TO DISCLOSE: SELLER’S SILENCE MAY BE COSTLY

For Illinois residents, the "as is" sale of homes is now a thing of the past. The new Residential Real Property Disclosure Act, effective October 1, 1994, requires the seller of residential property to deliver a written disclosure document regarding the physical conditions of the property to prospective buyers before any contract for sale is signed. Included under the Act are transfers by sale, installment contract, assignment of beneficial interest, or lease with an option to purchase. The Act does not apply, however, to transfers of newly constructed residential real property that has not been occupied nor does it apply other transfers including deeds in lieu of foreclosure and the following types of transfers: by inheritance; pursuant to certain court orders; and between spouses, descendants, and co-owners.

The Act is designed to benefit buyers, sellers, and real estate agents by reducing the number of oral representations made about the property and promoting faster settlement of claims. The new law provides a standardized form for the required disclosures.

Sellers are required to disclose material defects of which they have actual knowledge. "Material defect" means a condition having a substantial adverse effect on value or one that significantly impairs the health and safety of the occupants. The Act does not require sellers to investigate to find defects. And they are not required to amend the disclosure document after it has been delivered to the prospective buyer unless it contains errors, inaccuracies, or omissions they had knowledge of at the time the document was signed. Sellers are not liable for a defect they had knowledge of but reasonably believed was corrected nor are sellers liable for errors, inaccuracies, or omissions in information provided by a contractor (such as a structural engineer or a pest control inspector) about matters within the scope of the contractor’s expertise.

The required disclosure is not a warranty of the condition of the property and is not a substitute for any warranties the buyer might wish to negotiate for with the seller. Nor does the disclosure take the place of an inspection of the property by the buyer. Furthermore, the Act is not intended to limit or modify any obligation to disclose created by other statutes or the common law to avoid fraud, misrepresentation, or deceit in the transaction. In other words, full compliance with the Act will not fully insulate sellers from all risks of nondisclosure.

It is the seller’s responsibility to complete and deliver the disclosure document to the buyer. A seller who violates the Act will be liable for actual damages and court costs. The court may also award reasonable attorneys’ fees to the prevailing party. Actions for violation of the Act are barred after one year from the earlier of the date of possession, the date of occupancy, or the date on which the deed is recorded.

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