Roll Out of the New Property Condition Disclosure Statement

In September 2023, New York Gov. Kathy Hochul signed a new law that modified the Property Condition Disclosure Statement and changed important requirements under the law, including the elimination of the $500 credit/waiver. This new law goes into effect on March 20, 2024, so I’m going to review what you need to know about this law and the new form.

In general, the new PCDS is to be used for properties that go under a contract for sale as of March 20, 2024. The prior exemptions for the property exchange still exist and have not changed (example: foreclosures, transfer by court order or bankruptcy, new construction, etc.).

Beginning on Wednesday, March 20, 2024, all licensees must use the new PCDS for any “residential property,” meaning any one to four-family improved dwelling being used as a residence or home. It does not include unimproved land, condos, co-ops, or property that is part of an HOA that is not owned in fee-simple by the seller that goes under contract of sale. Until that time, real estate agents are to continue to use the old form (until 3/19/24). Failure to use the correct form may result in liability to both sellers and licensees. In anticipation of the change, the state has provided the new form and HGAR members can find the new form and the old form in the HGAR Document Library.

Important Changes

The new PCDS includes new language that requires the disclosure of issues related to flooding, but most importantly, it removes the $500 credit/waiver, which would have been provided by the seller to the buyer if the seller failed or refused to provide the PCDS.

Duty to Advise of Obligations

For agents listing a property, Section 466 of the Real Property Law states that the agent must inform their client of their obligations to fill out the PCDS. The same goes for the buyer’s agent, who needs to inform their buyer client they are entitled to receive a copy of the PCDS at some point before the buyer signs a binding contract of sale. It should be noted that if the buyer is not represented by an agent, the agent representing the seller must advise the buyer of his or her rights/obligations under the law.

If an agent performs these duties/obligations, the agent has satisfied their obligations under the law and they will not be liable to any party for a violation of the law.

Timing

The date of the listing agreement has no impact on whether the amended PCDS is required or which form is used. Under the law, every seller of residential property must complete and sign a PCDS and cause it, or a copy thereof, to be delivered to a buyer or buyer’s agent prior to the signing by the buyer of a binding contract of sale. Also, a copy of the PCDS containing the signatures of both the seller and the buyer must be attached to the contract of sale. This means that:

If a contract of sale has already been fully executed with the old PCDS signed by both parties (or they agreed to provide the $500 credit/waiver) prior to 3/20/24, then the seller has met their obligation.
If a listing was taken prior to March 20, 2024, and the PCDS was provided by the seller, but it was not signed by the buyer prior to March 20, 2024, the new amended PCDS must be used.
If the listing was taken prior to March 20, 2024, and the seller was going to opt for the $500 credit/waiver, if the contract of sale is not signed before March 20, 2024, then the seller would not be able to take advantage of the $500 credit/waiver and they would need to fill out and provide the new PCDS prior to the signing of a binding contract of sale.
If the seller has already provided the PCDS to the buyer and the buyer has not signed the PCDS prior to March 20, 2024, the new PCDS is required.
If the seller has not provided the PCDS and a binding contract of sale is entered into on or after March 20, 2024, the amended PCDS is required.

In some circumstances, the new PCDS will not be required. Those situations are:

If the seller has already provided the PCDS to the buyer and the buyer signed prior to March 20, 2024.
If the seller and buyer entered into a binding contract of sale prior to March 20, 2024.

Best Practices With the PCDS

The following are some best practices to employ with the new PCDS:

Provide the PCDS at first substantive contact and instruct the homeowner to speak to their attorney on how to fill it out and deliver it to the buyer.
Do not assist in filling the form out.
Explain that the PCDS will have to be provided to the buyer, signed, and attached to the contract of sale.
As a buyer’s agent, tell your client that he is entitled to a copy of the PCDS, which he will have to sign and which will be attached to the contract of sale.
Explain to a homeowner that the old form will expire on March 19, 2024, and, unless the buyer signs the old PCDS by then, the new PCDS will have to be executed.
Explain to the homeowner that the $500 credit/waiver will expire on March 19, 2024.
Tell the homeowner that if the condition of the property changes subsequent to filling out the PCDS, but prior to the buyer signing the PCDS, it will need to be updated.
Do not require that the PCDS be provided back to the listing agent, either to list the property or at any time prior to there being an accepted offer. This could create liability on the part of the agent.
If a PCDS is presented to a buyer’s agent, that buyer’s agent should forward that document to the buyer and provide a copy to their attorney.
If a PCDS is presented to a listing agent from the homeowner at or around the time that contract is to be signed, forward that document to the buyer’s agent instructing them to present it to their client and the buyer’s attorney.

PCDS Forms, Affirmation and New Listing Agreement Documents

HGAR maintains a document directory. Currently, that directory contains two sets of PCDSs. They are clearly marked as to when they are to be used (“Property Condition Disclosure Statement - effective until 3/19/2024” and “Property Condition Disclosure Statement - effective 3/20/2024”). Additionally, there are several sets of affirmations relating to the PCDS obligations of the buyer or seller that assist an agent in evidencing that they have provided the PCDS to their client, in satisfaction of the requirements under the law. Those forms also clearly identify which one is to be used prior to March 20, 2024, and which one is to be used after March 20, 2024.

Finally, as many of you already know, the Exclusive Right to Sell and the Exclusive Agency Agreements utilized by OneKey MLS have a provision related to the PCDS. Those provisions have been updated and those updated forms are now available. They too are clearly marked as to identify which one is to be used prior to March 20, 2024, and which one is to be used after March 20, 2024.

Conclusion

Timing is everything. Make sure you discuss these new changes with your client. As we approach the March 20, 2024 change, things might be tricky, so refer back to this article. Make sure you look at the calendar. Provide the correct documents, and ensure that you explain the current status of the law. After March 20, 2024, things will become much easier.