Many of us have been in the position of either selling or purchasing a home. While it is reasonable to seek out advice and representation from a well-qualified realtor, certain obligations are the direct responsibility of the seller of the property that cannot be avoided based upon a claim of ignorance or “My realtor said…” The most important obligation of a seller of property is to disclose all material defects of the property of which he/she has actual knowledge. This duty arises under the Illinois Residential Real Property Act.
The Act requires the seller of the property to deliver to the prospective buyer a report which contains a series of specific questions pertaining to the condition of the property. The questions relate to “material defects” that would have a substantial adverse effect on the value of the residential property, such as recurrent leakage, flooding, problems with the plumbing system, electrical system, heating, air conditioning, etc. The report also encompasses questions that relate to unsafe conditions, such as the presence of lead, asbestos and radon that would significantly affect the health or safety of the prospective buyers.
The duty of disclosure by the owner(s) relates to conditions that exist at the time of the completion of the report, of which the seller has actual knowledge and which the seller believes have not been corrected. A seller is not, however, required to undertake a specific investigation or inquiry in order to complete the report. Moreover, a seller will not be liable under the Act for any error, inaccuracy or omission of information from the report based upon a reasonable belief that any material defect or other matter not disclosed had been corrected. The duty to disclose is ongoing and further obligates the seller to supplement the original report if he/she becomes aware of any such condition after the original disclosure was completed.
The legal implications of knowingly providing false information in the disclosure report can be far-reaching. Prospective buyers may rescind or terminate the contract for sale of the property. Moreover, the seller may be subject to actual damages including the payment of expenses related to the repair of any material defect, court costs and attorney’s fees incurred by the prevailing party. Any action brought pursuant to this Act must be filed within one year from the earliest date of either the date of possession, occupancy or recordation of the instrument of conveyance.
In addition to the legal implication for alleged violations of the Illinois Residential Real Property Act, the seller and possibly his agent, may be sued under other theories of law such as negligent misrepresentation, violations of the Illinois Consumer Fraud and Deceptive Business Practices Act (as to the agent), common law fraud and violations of the Real Estate Brokers and Salesmen License Act.
Sellers must be aware that “as-is” language in a real estate sales contract does not shield a seller from liability. A buyer cannot waive the seller’s responsibility to disclose certain defects by signing a contract which includes this language. The owner must provide the buyer with a completed disclosure report. Moreover, Illinois courts have held that a buyer is entitled to rely upon the truthfulness, accuracy and completeness of the statements contained therein. Thus, while it is always prudent to have any property inspected, failure of a purchaser from undertaking any such action will not defeat a claim under the Illinois Residential Real Property Act. Further, Illinois courts have also held that the Act does not require buyers to investigate whether or not the information contained on the report is complete and accurate.
Finally, partial disclosure of any known defects will not relieve the seller from potential liability, even if the buyer has notice of the same. Thus, identifying an isolated incident of flooding without reporting recurrent episodes does not satisfy the seller’s duty under the Act. Furthermore, Illinois courts have also held that the buyers do not need to prove the defendant seller “actively concealed the material defect” in order to prevail under the Illinois Residential Real Property Act. TPW