FAQ’s On The Residential Real Property Disclosure Act – 765 ILCS 77/1 et seq.
What is it?
The Residential Real Property Disclosure Act is an Illinois statute that was enacted in 1998 with the purpose of protecting home buyers from unscrupulous sellers who falsely report the condition of their property. It is supposed to provide buyers with a reliable representation on the major conditions of a property.
It requires that sellers fully complete a form specifically answering 22 questions about a wide range of conditions of their property from foundation to plumbing and everywhere in between.
What does the Act cover?
Every residential property sold from single family up to four units, condominiums and co-ops are covered by the Act and requires the form be provided to buyers. The Act also covers lease options and Articles of Agreement for Deed a/k/a land contracts.
The Act does NOT cover new construction that has not been occupied, commercial condominiums or other commercial properties, foreclosure sales, deed in lieu transfers, sales or transfers due to divorce, probate or bankruptcy or transfers between
What disclosures does the Seller make on the form?
The Residential Real Property Disclosure Report form covers 23 separate line items:
- Seller occupied the property during the last 12 months.
- Was there flooding or leakage in the crawlspace or basement.
- Is the property in a flood plain or is there flood insurance on the property.
- Are there defects in the basement foundation.
- Are there leaks or defects in the roof, ceilings or chimney.
- Are there defects in the walls or floors.
- Are there defects in the electrical system.
- Are there defects in the plumbing system (which includes water heaters, sump pumps, treatment systems, sprinkler systems and swimming pools)
- Are there defects in the well system.
- Is the drinking water safe.
- Are there defects in the HVAC system.
- Are there defects in the fireplace or woodburning stove.
- Are there defects in the septic, sanitary sewer or disposal system.
- Are the radon levels safe?
- Are there unsafe asbestos conditions.
- Are there unsafe conditions regarding lead paint, lead pipes or lead in the soil.
- Is there settlement or earth instability.
- Are there termites or other wood boring insects.
- Did termites or wood boring insects leave structural defects from a past infestation.
- Are there underground fuel storage tanks.
- Are there any boundary line disputes.
- Have there been any violations of any laws relating to the property.
- Was the property ever used as a methamphetamine lab.
What if the problems existed before but were corrected?
The Act says that the form is supposed to be completed for the current condition of the property and, if the seller reasonably believes prior problems were fixed, they need not be disclosed. However, to be safe, as a seller, a full disclosure of previous problems with a description of what was done to correct them and when the corrections were made, would go a long way to avoiding any liability under the Act. As a Buyer, it is not a bad idea to ask a Seller if there were any issues on the Disclosure Form that were not disclosed because they were previously corrected.
Who needs to sign the form?
The Act says that a seller is “every person or entity who is an owner, beneficiary of a trust, contract purchaser or lessee of a ground lease, who has an interest (legal or equitable) in a residential real property.”
A Seller is NOT someone who (1) never occupied the property AND (2) never had or designated the management responsibility for the property. Without much case law to further define a “Seller,” a “Seller” is really just about anyone or any entity selling a residential property covered under the Act.
The Act defines a buyer as “any person or entity negotiating or offering to become an owner or lessee of residential real estate covered by under the Act.
What happens if no form is completed or tendered?
If seller fails to tender a fully completed form, the buyer may cancel the contract prior to closing. If the sale closes without seller fully completing and tendering the form, the seller is automatically liable for violating the Act and buyer need only prove up their damages.
What if the sale was “As Is?”
Even if the parties agree in the sale contract that the property is sold “As Is,” the seller still must complete the form.
What are some common post closing issues that might trigger the Act?
Some of the most common incidents after closing calling the Act into play are basement flooding, foundation problems like cracks, sinking or settling, and major plumbing problems.
Quite often buyers will be provided with a form prior to closing that fails to mention any issues or says that there was some minor seepage many years ago but nothing since. Then, a few months after closing, the new buyers find their basement flooded. While the buyers are dragging their carpet and furniture to the garbage on the curb, their new neighbors tell them that the house has always flooded. The sellers appear to have violated the Act by failing to inform the buyers about the flooding.
Another common occurrence is after closing buyers find that their windows and doors don’t close very well and there seems to be a slant to some of the floors. Upon further investigation, the buyers find that the foundation is settling and could require major work to correct the problem. Sellers should have informed buyers about the settlement and foundation problems.
What can a buyer do if seller violated the Act?
After closing, a buyer’s best remedy is to file a lawsuit against the seller for violation of the act. Those lawsuits may also include claims against the seller for breach of contract, fraud or a request to make the seller buy the property back from the buyer.
How do I know if I have a case?
The main concern is the amount it will cost to fix the things the seller misrepresented. Many times water issues can be corrected for less than $1,000.00. In that case, the costs of a lawsuit would eclipse the amount to actually fix the problem. However, many other times, water issues or foundation problems may require repairs in the tens of thousands of dollars. In that instance, a buyer’s only option may be to pursue a lawsuit seeking the seller to pay for such repairs.
If I have a case, what can I recover?
The Act itself allows for a buyer to recover actual damages from a seller for a violation. Actual damages are actual out of pocket costs for repair or replacement of the property or damaged personal property. The Act also allows for a buyer to obtain legal fees from the seller for the suit, although this is very difficult to achieve. Further, under related causes of action, a buyer may even be able to have the seller buy back the property and, essentially, undue the sale.
What if I still have more questions?
The attorneys at Fritzshall & Pawlowski have settled many cases and completed numerous trials dealing with the Residential Real Property Disclosure Act and have a wealth of knowledge on the Act. Call us for a free consultation.