The Illinois Real Property Disclosure Act & Other Buyer Remedies in the Event of an Undisclosed Defect in Residential Real Estate
When selling a home in Illinois it is important for sellers to familiarize themselves with the disclosures required under the Illinois Real Property Disclosure Act. In addition to imposing obligations on sellers, the Act grants buyers powerful rights to go after sellers for improper disclosures.
What is the Illinois Real Property Disclosure Act?
The Illinois Real Property Disclosure Act (the “Act”) grants buyers important rights when buying property in Illinois. The Act become law in Illinois in 1998 and was designed to protect purchasers of residential properties from sellers that fail to disclose important information during the sale process. Under prior law, sellers were not required to disclose certain information about a property unless they were expressly asked by buyers about a given issue with the property. In addition to single family homes, the Act covers residential properties up to four units, as well as condominiums and co-ops.
Where the Real Property Disclosure Act applies, Sellers are required to complete the Illinois Realtors Residential Real Property Disclosure Report. The Report lists 23 different questions to be completed by the party selling a home in Illinois. Some of the issues that must be disclosed include:
- Material Defects: includes things like faulty wiring, malfunctioning heating and/or air conditioning, and damaged fixtures
- Flooding: includes a list of all instances of known flooding regardless of the source
- Unsafe Conditions: includes structural defects like foundation damage and a leaking roof
- Environmental Issues: includes things like lead paint and asbestos. It is important to note that sellers are not required to test for radon in Illinois
- Insects and Pests: infestations, particularly termites and other insects that can potentially damage the structure, must be disclosed
- Soil Conditions: includes things that could potentially jeopardize the structure of the house, like an abandoned well
Can the Parties to a Contract Opt-Out of the Illinois Real Property Disclosure Act?
It is not uncommon when selling a home in Illinois for the seller to list the property “as is”. An “as is” sale means that the property is being sold with all faults, whether known or unknown by the seller at the time of the sale. In this form of transaction, the purchaser is accepting all the risk, which is typically reflected in the price. However, under the Illinois Real Property Disclosure Act, the seller must still complete the Disclosure Report.
There are several exceptions worth mentioning. If the property is being sold pursuant to a divorce settlement, foreclosure, bankruptcy case, or being gifted from one family member to another, then disclosures are not required. Also, if the seller never resided in the property, he is not required to complete the Disclosure Report.
How Do I Complete the Illinois Realtors Residential Real Property Disclosure Report?
Your realtor or an Illinois real estate attorney can give you a copy of the Disclosure Report. It is generally advisable to complete the Report once you have had a consultation with a real estate lawyer. The majority of the questions on the form focus on material defects. Material defects have a specific meaning under the Act – they are conditions that substantially impair the value of the property or the safety of its occupants. It will not always be clear whether a known condition arises to the level of a material defect requiring disclosure. If you are unsure whether to disclose an issue, it is better to disclose than risk a future lawsuit by an unhappy buyer. An Illinois real estate attorney can be indispensable in helping you to determine which items should be disclosed.
It is important to note that the law does not require you to actively search for defects. For instance, you have no duty to have the property inspected prior to completing the Disclosure Report. The law is concerned only with those material defects that you have actual knowledge of. If you learn of a material defect after you have sent the completed Disclosure Report to the buyer, then you must send the buyer a Supplemental Disclosure as soon as possible.
Importance of Proper Disclosure by Sellers
It is important for sellers to be truthful and properly disclose all known issues with the property. From a liability standpoint, failing to accurately answer all questions on the Disclosure Report can result in a significant judgment in favor of the buyer, as well as undo the sale. The seller, as well as his or her broker, are also bound by statements made during the negotiation process. Both parties can be held liable for misleading statements made to the buyer. For instance, stating that the property has never had any water damage or flooding, or that steps were taken to prevent future flooding when they were not, can result in damages being awarded to the buyer.
There is simply too much to lose by failing to properly disclose all known issues when selling a home in Illinois. While the disclosures may scare off some potential buyers, you will save yourself a lot of time and money down the road should the buyer learn that you failed to properly disclose all known defects under the Illinois Real Property Disclosure Act.
Legal Claims Against Sellers for Improper Disclosures
Buyers have important rights under Illinois law where the seller has failed to provide a Disclosure Report or submitted an incomplete or inaccurate Report. If the seller fails to provide the Report to the buyer, then the buyer has the right to terminate the contract at anytime before closing.
If the seller has provided you with a Disclosure Report that is inaccurate or incomplete, you may be able to file a lawsuit for breach of contract or even fraud. Under the Illinois Real Property Disclosure Act, you may be entitled to recover actual damages – out of pocket costs you incurred repairing the property. Buyers are also able to seek legal fees and costs from the seller. You may also be able to force the seller to purchase the property back from you. In addition to important rights and protections under the Illinois Real Property Disclosure Act, you may be able to recover damages under other laws designed to protect buyers.
If you are selling a home in Illinois or have recently purchased a property only to learn of one or more defects, contact an experienced Illinois real estate attorney today to discuss your duties and rights.