With the increase in residential real estate transactions, frequent questions are coming to the Legal Hotline about required property disclosures. Recently, a common question has been:

The frequency of this question suggests that a general overview on property disclosure requirements, along with clarifying common areas of confusion, under the Illinois Residential Real Property Disclosure Act, Illinois Radon Awareness Act and federal Lead-based Paint disclosure requirements could be very beneficial to many REALTORS®.

Anneliese Fierstos
Illinois REALTORS® Legal Hotline Attorney

A. Illinois Residential Real Property Disclosure Act:

Illinois requires mandatory disclosure by most sellers of property conditions under the Residential Real Property Disclosure Act which applies to “real property improved with not less than one nor more than four residential dwelling units; units in residential cooperatives; or, condominium units, including the limited common elements allocated to the exclusive use thereof that form an integral part of the condominium unit. The term includes a manufactured home as defined in subdivision (53) of Section 9-102 of the Uniform Commercial Code that is real property as defined in the Conveyance and Encumbrance of Manufactured Homes as Real Property and Severance Act.” The Act places the duty on the Seller to make disclosures in most transactions before signing the written contract to sell the property.

Sellers’ Obligations:

• Most sellers are responsible for completing a 23- question disclosure form about the condition of the property and honestly disclosing those matters they actually know about. Of course, if a seller has no actual knowledge about something, he could answer “no” (or not aware) about any of the items on the form, but if he has a question about how to respond, his broker should refer him to his attorney for specific advice.
• Sellers have a continuing duty to supplement the disclosure in writing if the seller gains actual knowledge of a material defect after the original disclosure form was delivered to a prospective buyer. No particular form for supplemental disclosure is required so long as it is in writing.

Buyers’ Rights under the Act:

• If seller does not provide a seller disclosure form before a binding contract is entered, the buyer may have certain rights to rescind the contract if there are known but undisclosed material physical defects.
• The form does not substitute for any inspections and buyers should consider having inspections done and/or negotiating warranties with the seller.
• If the form is presented to the buyer after the purchase contract is signed and prior to closing and it reveals material defects, the buyer has three business days to terminate the contract.
• Section 55 gives the buyer the right to terminate the contract if the seller refuses or fails to provide the disclosure document prior to the conveyance of the residential real property.
• Buyers should consult with their attorneys for specific legal advice on their rights under the Act if Seller does not meet their obligations.

Must the executor of an estate provide a disclosure form under the Act?

No. Section 15 of the Act provides several exceptions to the disclosure requirements. A few examples of excepted transactions include the following:

• Transfers pursuant to a court order (e.g. in the administration of an estate, in a judgment of dissolution of a marriage, by a trustee in a bankruptcy);
• Transfers from a mortgagor to a mortgagee in foreclosure proceedings, and upon resale by the mortgagee who took back in foreclosure to a new buyer;
• Transfers by a fiduciary in the administration of a decedent’s estate, guardianship, conservatorship, or trust;
• Transfers in which a relocation company has taken title to assist in the relocation of the seller (in cases where the original owner provides a disclosure form to buyer);
• Transfers to or from a governmental entity;
• Transfers of new construction where the property has never been occupied.

The list above is not all-inclusive, and Sellers should consult with legal counsel for an independent legal opinion whether disclosures are required.

If my Seller lists their house for sale ”as is” do they still have to complete the Residential Real Property Disclosure Form?

Yes. Selling a property in “as is” condition does not eliminate the responsibility of the seller to complete the Residential Real Property Disclosure Form. Technically, when a real estate agent lists a house to sell as is, it means the homeowner is selling the home in its current condition, and will make no repairs or improvements before the sale and may not be willing to negotiate with the buyer for any credits to fund repairs.   Sellers often list homes “as-is” if they are in disrepair and the homeowners or other sellers can’t afford to fix these flaws before selling the property.

The seller must still disclose known problems pursuant to the Residential Real Property Disclosure Act, even in an “as-is” sale.

More information on the Residential Real Property Disclosure Act can be found in the Legal A-Z section of Illinois REALTORS® website.

B. Illinois Radon Awareness Act (“The Act”):

The Illinois Radon Awareness Act applies to transactions involving the sale of residential real property. Residential real property is defined under the Act as follows: “any estate or interest in a manufactured housing lot or a parcel of real property improved with not less than one nor [sic] more than 4 residential dwelling units.” Disclosure might be required in some residential lease transactions where a test shows a radon hazard that has not been remediated by an IEMA licensed contractor or has not been re-tested showing no hazard. If disclosure is required on a lease, it only applies to units located on or below the second floor.

The seller is also required to provide a pamphlet entitled “Radon Testing Guidelines for Real Estate Transactions” along with the Illinois Disclosure of Information on Radon Hazards to the buyer before a contract is entered. The Act does not require a seller to test for radon or to engage in “mitigation activities.”

The Act does apply to new construction, but excludes the follow transactions:

• Transfers pursuant to a court order;
• Transfers from a mortgagor to a mortgagee in foreclosure proceedings, and upon resale by the mortgagee who took back in foreclosure to a new buyer;
• Transfers by a fiduciary in the administration of a decedent’s estate, guardianship, conservatorship or trust;
• Transfers from one co-owner to one or more co-owners, transfers pursuant to testate (with a will) or intestate (without a will) succession;
• Transfers to a spouse or another blood relation;
• Transfers from a relocation company who has taken title (so long as the original seller has provided the required disclosures to the relocation company);
• Transfers to or from any governmental entity;
• Transfers of any unit (including condos or coops) located on the third story or higher above ground level.

More information on the Illinois Radon Awareness Act can be found in the Legal A-Z section of Illinois REALTORS® website.

C. Federal Lead-Based Paint Disclosures:

Federal Law requires lead-based paint disclosures when selling or renting a house built before 1978. The disclosure provides notice to a buyer or tenant that the property may present exposure to lead from lead-based paint that may place young children at risk of developing lead poisoning. Unlike the Illinois Residential Real Property Act and the Radon Awareness Act, there are very few exceptions to the lead-based paint disclosure requirement other than if the property was built after 1978.  Federal law requires a pamphlet entitled “Protect Your Family From Lead in Your Home” to be given along with the disclosure form in both sales and lease transactions of properties built prior to 1978.

Federal law requires property owners to:

• Disclose any knowledge of lead-based paint or lead-based paint hazards when selling or renting a house built before 1978;
• Allow a buyer an opportunity to negotiate for a lead inspection at the buyer’s expense (Seller does not have to agree but this could kill the deal);
• Include a lead warning statement in leases,
• Use lead-safe work practices when making certain repairs and renovations.

More information on Lead-Based Paint Disclosures can be found in the Legal A-Z section of Illinois REALTORS® website.