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New York Changes to Real Property Law, Requiring Disclosure of Flood Insurance and Elimination of $500 Buyer Credit for Waiving Property Disclosure Statement

On September 22, 2023, New York passed and signed into law Senate Bill S5400 (“S5400”) as an amendment to Real Property Law, Chapter 50, Article 14, which became effective March 20, 2024. S5400 amends the disclosure requirements for sellers in residential property transactions. Prior to enacting this change, before a buyer of a residential property entered into a contract for sale, the seller was required to, among other things, provide a Disclosure Statement which covers general information about the property and structures, environmental concerns, and functionality of mechanical and other systems. One of the environmental disclosures included whether the property is located in a “designated floodplain,” which is intended to inform buyers whether there are flooding, drainage, or grading problems resulting in standing water on the property.


Real Property Laws allowed parties in a property sale transaction to waive the Property Disclosure Statement requirement by permitting the buyer to receive a $500 credit on the purchase price for that waiver. Often attorneys for a seller advise their clients to pay the $500 credit because questions on the Property Disclosure Statement have language that is vague and could unfairly expose sellers to second-guessing and claims for misrepresentations or omissions. Importantly, the Property Disclosure Statement does not provide the buyer with any new warranties, and buyers are still expected to secure their own inspections for properties. New York State has now taken the view that a $500 credit is a negligible penalty and noted that many sellers considered the disclosure statements as optional, and the available $500 credit simply a part of the cost of doing business.


New York State further justifies the enactment of this amendment because in its reasoning, those purchasing property in New York deserve to be informed about the condition of the residential properties they are buying; for example, buyers should be aware of any flood risks they might face when buying or renting their homes, especially in areas of New York where flooding occurs much more frequently.


By enacting this legislation, New York has eliminated the $500 purchase price credit available to sellers now mandating that Property Disclosure Statements be provided to buyers of residential property. Those Disclosure Statements and the forms related thereto have been updated to include the following questions:

·        Is any or all of the property located in a FEMA designated floodplain?

·        Is property located in the special flood hazard area (100 year floodplain)?

·        Is property located in a moderate flood hazard area (500 year floodplain)?

·        Is property subject to requirement for flood insurance? Is there currently flood insurance on the property?

·        Is there a FEMA elevation certificate?

·        Have you or previous owners ever received assistance from FEMA, the US Small Business Administration, or any other Federal disaster assistance for flood damage to the property?


New York’s Real Property Law outlines 14 exemptions to the Property Disclosure Statement requirement, largely related to the mechanism by which the property was transferred. Transfers such as those initiated by court orders, mortgage and foreclosure-related transactions, estate transfers, as well as others are exempt from these Property Disclosure Statements.

 

 

Our firm has extensive experience counseling residential buyers, sellers, and others on statutory requirements, as well as preparing properties for sale or purchase. If you have any questions related to this Legal Briefing, please contact any member of our Firm at 585-730- 4773.



New York Changes to Real Property Law, Requiring Disclosure of Flood Insurance
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This Legal Briefing is intended for general informational and educational purposes only and should not be considered legal advice or counsel. The substance of this Legal Briefing is not intended to cover all legal issues or developments regarding the matter. Please consult with an attorney to ascertain how these new developments may relate to you or your business. ©2024 Law Offices of Pullano & Farrow PLLC

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