Illinois HB4322–the Residential Real Property Disclosure Act–was signed into law by Governor Pritzker and is effective immediately. The new disclosure form includes amended language but the form itself is not available yet.
As we’ve previously written, brokers can be liable for disclosure statement inaccuracies. False or misleading statements, per the Illinois Consumer Fraud and Deceptive Business Practices Act can mean that a broker would be responsible for a multitude of damages, including repair and court costs, attorneys fees, as well as punitive damages.
Sellers can be on the hook, too. If they fail to disclose known problems with the property, they can be sued after the closing is completed. Brokers are expected to have sellers complete disclosures with some exceptions, including:
- A seller who has not resided in the property in the past year
- A Trustee who has had no contact with the property
- An investor who has rehabbed the property but not resided in it
Here are the updates you need to know per the Illinois Real Estate Law Association:
- Changes the definition of “seller” to mean a beneficiary of an Illinois or personal trust, an owner, a beneficiary until a testate instrument (like a Trust or TODI) and intestate beneficiary or a contract purchaser.
- Consolidates exempt Sellers and transfers from Sections 5 and 15 to Section 15 only.
- Defines “contract” (which was not previously defined).
- Changes the phrases “disclosure document” and “disclosure statement” to “disclosure report”.
- Provides that if a seller is involved in specified types of transfers, the seller is exempt from the Act, regardless of whether a disclosure report is delivered. (Such as between spouses based on a divorce judgment)
- Provides that the seller shall deliver to the prospective buyer the written disclosure report before the signing of a contract (rather than before the signing of a written agreement by the seller and prospective buyer that would require the prospective buyer to accept a transfer of the residential real property).
- Provides that if, prior to closing, any seller becomes aware (rather than has actual knowledge) of an error, inaccuracy, or omission in any prior disclosure report or supplement after delivery of that disclosure report or supplement to a prospective buyer, that seller shall supplement the prior disclosure report.
- Makes changes to the disclosure report form.
- Provides that if a seller discloses a material defect in the disclosure report, a prospective buyer, within 5 (rather than 3) business days after receipt of the disclosure report, may terminate the contract.
- Provides that if a seller discloses a material defect in a supplement to the disclosure, the prospective buyer shall not have a right to terminate unless: (i) the material defect results from an error, inaccuracy, or omission of which the seller had actual knowledge at the time of the prior disclosure; (ii) the material defect is not repairable prior to closing; or (iii) the material defect is repairable prior to closing, but within 5 business days after delivery of the supplemental disclosure, the seller declines, or otherwise fails to agree in writing, to repair the material defect.
- Allows for the disclosure report to be delivered by email or other electronic delivery.
- Codifies in uniformity with laws enacted after 1994, namely the Illinois Trust Code and the Transfer on Death Instrument Act.
As with all legal matters associated with real estate transactions, it is critical that your clients seek the expertise of an experienced real estate attorney to navigate disclosure intricacies.