Breaking News: New Rules on Property Condition Disclosure and Flood Risk Go Into Effect Today
3.20.2024
A new real estate law goes into effect today, bringing with it major changes that remove the option to give the buyer a $500 credit at closing instead of filling out the property disclosure form. The amendments of the real property law also add new questions for sellers to answer on flood risk and flood insurance.
Nearly 200 lawyers attended a Continuing Legal Education workshop on the changes that was presented by the New York State Bar Association. The on-demand class is available to purchase.
Karl Holtzschue and William McCracken go into detail on the origin of the property disclosure act signed by former Gov. George Pataki in 2001 and how the changes to the law signed by Gov. Kathy Hochul impact residential home sales.
The law, A.1967/S54.00, requires that sellers answer questions on potential flood risk, a history of flooding and flood insurance. In the past, attorneys for sellers in downstate counties advised their clients to give the $500 credit instead of completing the property disclosure form because many of the questions are vague and could spell legal trouble. The amended law removes this option.
New Property Disclosure Statement Questions About Flood Risk and Flood Insurance
- Is any or all of the property located in a FEMA designated floodplain?
- Is property located in the special flood hazard area (100 yr floodplain)?
- Is property located in a moderate flood hazard area (500 yr floodplain)?
- Is property subject to requirement for flood insurance?
- Have you ever received assistance from FEMA, the U.S. Small Business Administration, or any other federal disaster assistance for flood damage?
- Is there flood insurance on the property?
- Is there a FEMA elevation certificate?
- Have you ever filed a claim for flood damage to the property with any insurance provider?
“Most residential contracts have an “as is” clause. The buyer has a duty to use the means available to check the condition of the property,” Holtzschue said. “Buyers lose many cases when they fail to do so. Neither the “as is” nor the merger clause will generally protect the seller from a claim of fraud.”
McCracken agreed, saying, “There has been a strong push in the legislature for flood risk disclosure for years. Lawmakers were motivated to get more information to the consumer and not concerned with the seller or the impact the change would have on the process.”
McCracken went on to outline the impact of the new disclosure rules on co-op owners, lessors, and tenants. This includes notices to tenants about flood insurance available to renters, which is often not included in renters’ insurance policies. You can order the full one hour class replay here.
The New York State Bar Association’s Property Law Section published an article in December 2023 that details the new property law changes after Gov. Hochul signed the law.
