As an attorney who primarily represents buyers in court, I regularly conduct discovery on insurance claims filed by sellers. Evidence that sellers filed an insurance claim based on the same condition that they later failed to disclose to buyers in their Real Estate Condition Report is pure gold. Such evidence establishes that the condition existed and that the sellers thought that it was significant enough to file an insurance claim. Sellers have a really hard time explaining why they checked "NO" to a property condition statement relating to flooding or leaks when they got $10,000 from their insurance company for basement flooding.
The new Real Estate Condition Report required by Wis. Stat. § 709.03 mitigates against such situational candor through requiring sellers to answer the following question:
Have you filed any insurance claims relating to damage to this property or premises within the last five years?
Please note that there is no exception based on the sellers' subjective belief that they have resolved whatever condition caused the damage. If the seller has filed an insurance claim within the last five years, he or she must answer this question "YES." The seller should explain his or her "YES" response at the end of Section G, preferably through attaching documents relating to the insurance claim.
Of course, I have also discovered that sellers "forget" to disclose conditions in their Real Estate Condition Report that previously caused them to make a warranty claim against the manufacturer of their roofing shingles, participate in a class action settlement against their siding manufacturer, or even sue their seller for misrepresentation.
Since the Real Estate Condition Report still does not specifically require sellers to disclose such claims, I sometimes write language in offers requiring sellers to provide copies of all warranties and any warranty claims. You can also find any legal actions that your sellers have filed (or have had filed against them) in Wisconsin courts through Wisconsin Circuit Court Access.
Wednesday, July 11, 2018
Monday, July 9, 2018
The New Real Estate Condition Report Expands Required Disclosure Of Unpermitted Work
Before Act 338, the statutorily-required Real Estate Condition Report asked sellers to either agree or disagree with the following statement:
I am aware either that remodeling affecting the property's structure or mechanical systems was done or that additions to to this property were made during my period of ownership without the required permits.
While most would agree on what qualifies as an "addition," "remodeling" seems rather vague and indefinite. Homeowners remodel their kitchens, bathrooms, and rec rooms in ways that affect a property's structure or electrical or plumbing systems. What about foundation repairs though? Such work arguably does not fall within the definition of "remodeling," but many buyers would want to know if such work was done without the required permits, especially since foundation repairs so clearly affect a property's structure.
The new Real Estate Condition Report now required by Wis. Stat. § 709.03 asks sellers the following question:
Are you aware of any remodeling, replacements, or repairs affecting the property's structure or mechanical systems that were done or additions to to this property that were made during your period of ownership without the required permits?
This change should decrease seller confusion about what unpermitted work must be disclosed at the time of sale and help buyers become better informed about such work.
Trouble is, this change still depends upon sellers having awareness (i.e., knowing or being put on notice) of local permitting requirements, which vary greatly. A seller has not answered such a question improperly if he or she was in fact unaware that the local municipality requires permits for installing a patio or replacing a roof. Buyers should insist on receiving documentation from their sellers on all remodeling, replacements, repairs, and additions that were made during the sellers' ownership. Buyers should also make open records requests of the local building inspector for copies of all permits that were issued during the sellers' ownership. In Milwaukee, you can find some of this information online without having to make a formal request.
I draft language in offers protecting buyers from awful surprises like unpermitted repairs made by sellers or their unlicensed contractors. Please contact me at rudolphkuss@stevensandkuss.com if you want to be represented during your most important purchase.
I am aware either that remodeling affecting the property's structure or mechanical systems was done or that additions to to this property were made during my period of ownership without the required permits.
While most would agree on what qualifies as an "addition," "remodeling" seems rather vague and indefinite. Homeowners remodel their kitchens, bathrooms, and rec rooms in ways that affect a property's structure or electrical or plumbing systems. What about foundation repairs though? Such work arguably does not fall within the definition of "remodeling," but many buyers would want to know if such work was done without the required permits, especially since foundation repairs so clearly affect a property's structure.
The new Real Estate Condition Report now required by Wis. Stat. § 709.03 asks sellers the following question:
Are you aware of any remodeling, replacements, or repairs affecting the property's structure or mechanical systems that were done or additions to to this property that were made during your period of ownership without the required permits?
This change should decrease seller confusion about what unpermitted work must be disclosed at the time of sale and help buyers become better informed about such work.
Trouble is, this change still depends upon sellers having awareness (i.e., knowing or being put on notice) of local permitting requirements, which vary greatly. A seller has not answered such a question improperly if he or she was in fact unaware that the local municipality requires permits for installing a patio or replacing a roof. Buyers should insist on receiving documentation from their sellers on all remodeling, replacements, repairs, and additions that were made during the sellers' ownership. Buyers should also make open records requests of the local building inspector for copies of all permits that were issued during the sellers' ownership. In Milwaukee, you can find some of this information online without having to make a formal request.
I draft language in offers protecting buyers from awful surprises like unpermitted repairs made by sellers or their unlicensed contractors. Please contact me at rudolphkuss@stevensandkuss.com if you want to be represented during your most important purchase.
Friday, July 6, 2018
Sellers Now Have To Disclose How Long They Have Owned The Property In Their Real Estate Condition Report
Before Act 338, Wis. Stat. § 709.03 only required sellers of residential real estate to disclose how long they had "lived" in the property in their Real Estate Condition Report.
Unfortunately, sellers' responses to this question often painted a misleading picture, particularly with regard to duplexes and other residential rental property. After all, sellers of rental property may have never "lived" in their property. Yet, they might have important information about their property's condition that they learned from their contractors or their tenants. A buyer purchasing a property based on a real estate condition report saying that the owner has lived in the property for 0 years could quite reasonably assume that the owner does not know anything about the property's condition and could thus disregard the owner's representations in that condition report that he or she is not aware of any defects in the property.
Under Wis. Stat. § 709.03 as amended by Act 338, sellers now must disclose in their Real Estate Condition Report how long they have "owned" the property as well as how long they have "lived" in the property. I view this as a positive change because it helps buyers of residential real estate - particularly rental property - distinguish between properties that have been owned by the seller for more than ten years from properties that were only recently inherited by the seller. With that additional information, buyers should be able to more confidently rely upon a real estate condition report completed by a long-time owner of a property even if that owner has never lived onsite.
Do sellers of residential rental property really need to complete a Real Estate Condition Report? As long as the property has 1 to 4 dwelling units and the seller is not otherwise exempt from Chapter 709's requirements (i.e., the seller is not a personal representative of an estate nor the trustee of a trust), a seller of residential rental property must complete a Real Estate Condition Report based on his or her notice or knowledge of conditions affecting the property. If your tenants have told you that the toilets frequently overflow or that the foundation walls leak when the snow melts, you'd better include that information in your Real Estate Condition Report.
If you're selling your rental property and need help completing the new Real Estate Condition Report, please contact me at rudolphkuss@stevensandkuss.com.
Unfortunately, sellers' responses to this question often painted a misleading picture, particularly with regard to duplexes and other residential rental property. After all, sellers of rental property may have never "lived" in their property. Yet, they might have important information about their property's condition that they learned from their contractors or their tenants. A buyer purchasing a property based on a real estate condition report saying that the owner has lived in the property for 0 years could quite reasonably assume that the owner does not know anything about the property's condition and could thus disregard the owner's representations in that condition report that he or she is not aware of any defects in the property.
Under Wis. Stat. § 709.03 as amended by Act 338, sellers now must disclose in their Real Estate Condition Report how long they have "owned" the property as well as how long they have "lived" in the property. I view this as a positive change because it helps buyers of residential real estate - particularly rental property - distinguish between properties that have been owned by the seller for more than ten years from properties that were only recently inherited by the seller. With that additional information, buyers should be able to more confidently rely upon a real estate condition report completed by a long-time owner of a property even if that owner has never lived onsite.
Do sellers of residential rental property really need to complete a Real Estate Condition Report? As long as the property has 1 to 4 dwelling units and the seller is not otherwise exempt from Chapter 709's requirements (i.e., the seller is not a personal representative of an estate nor the trustee of a trust), a seller of residential rental property must complete a Real Estate Condition Report based on his or her notice or knowledge of conditions affecting the property. If your tenants have told you that the toilets frequently overflow or that the foundation walls leak when the snow melts, you'd better include that information in your Real Estate Condition Report.
If you're selling your rental property and need help completing the new Real Estate Condition Report, please contact me at rudolphkuss@stevensandkuss.com.
Monday, July 2, 2018
Some Sellers Will Have To Complete A New Real Estate Condition Report
This post is for you if you currently have residential real estate or vacant land for sale.
Since you read this blog, you know about Act 338 and the new Real Estate Condition Report. July 1, 2018 has come and gone, and Section 8 of Act 338 clearly says that "[t]his Act takes effect on July 1, 2018." You have already completed a Real Estate Condition Report. Do you have to complete the new Real Estate Condition Report required by Wis. Stat. § 709.03 as amended by Act 338?
You do not have to complete a new Real Estate Condition Report if your Real Estate Condition Report was furnished to the prospective buyer of your property on or before June 30, 2018:
Section 7. Initial applicability.
Since you read this blog, you know about Act 338 and the new Real Estate Condition Report. July 1, 2018 has come and gone, and Section 8 of Act 338 clearly says that "[t]his Act takes effect on July 1, 2018." You have already completed a Real Estate Condition Report. Do you have to complete the new Real Estate Condition Report required by Wis. Stat. § 709.03 as amended by Act 338?
You do not have to complete a new Real Estate Condition Report if your Real Estate Condition Report was furnished to the prospective buyer of your property on or before June 30, 2018:
Section 7. Initial applicability.
(1) Real estate condition and vacant land disclosure reports.
The treatment of sections 709.03 and 709.033 of the statutes first
applies to reports that are furnished on the effective date of this
subsection.
This rule appears to apply even if the prospective buyer does not make an offer until July 1, 2018 or later. Since you furnished a Real Estate Condition Report that complied with the previous version of the statute, you do not have to complete a new Real Estate Condition Report that complies with the amended version of the statute.
What if you completed a Real Estate Condition Report but did not furnish it to any prospective buyer on or before June 30, 2018? The answer to that question is less clear.
I disagree with those who will argue that sellers do not have to complete a new Real Estate Condition Report simply because they completed a Real Estate Condition Report that complied with the previous version of the statute. Section 7 of Act 338 does not say that the amended version of the statute first applies to reports that are completed on the effective date; it says that the amended version of the statute first applies to reports that are furnished on the effective date.
Within the context of Chapter 709, "furnished" means "provided" or "shared," as that is how "furnished" is used in Wis. Stat. s. 709.02(1) - the statutory subsection that requires disclosure of property conditions through a Real Estate Condition Report. Wis. Stat. § 709.02(1) speaks of furnishing a Real Estate Condition Report to "the prospective buyer."
Does that mean that once a prospective buyer goes away, you have to furnish a new Real Estate Condition Report that complies with the amended version of the statute to the next prospective buyer? My original post supported that position, but I now reject it. Section 7 of Act 338 speaks of "reports that are furnished" - not "reports that are furnished to the prospective buyer."
Does that mean that you have "furnished" a Real Estate Condition Report through sharing it on the Multiple Listing Service or on a real estate portal? Or does that mean that you must have provided a Real Estate Condition Report that complies with the previous version of the statute to a prospective buyer? Section 7 of Act 338 is silent on "furnished to whom," and silence breeds ambiguity. Since the legislature did not clearly answer this question, sellers have an argument that they do not have to furnish a new Real Estate Condition Report if they shared the old one with the public, and buyers have an argument that sellers have to furnish a new Real Estate Condition Report unless the old one was furnished to a prospective buyer.
I disagree with those who will argue that sellers do not have to complete a new Real Estate Condition Report simply because they completed a Real Estate Condition Report that complied with the previous version of the statute. Section 7 of Act 338 does not say that the amended version of the statute first applies to reports that are completed on the effective date; it says that the amended version of the statute first applies to reports that are furnished on the effective date.
Within the context of Chapter 709, "furnished" means "provided" or "shared," as that is how "furnished" is used in Wis. Stat. s. 709.02(1) - the statutory subsection that requires disclosure of property conditions through a Real Estate Condition Report. Wis. Stat. § 709.02(1) speaks of furnishing a Real Estate Condition Report to "the prospective buyer."
Does that mean that once a prospective buyer goes away, you have to furnish a new Real Estate Condition Report that complies with the amended version of the statute to the next prospective buyer? My original post supported that position, but I now reject it. Section 7 of Act 338 speaks of "reports that are furnished" - not "reports that are furnished to the prospective buyer."
Does that mean that you have "furnished" a Real Estate Condition Report through sharing it on the Multiple Listing Service or on a real estate portal? Or does that mean that you must have provided a Real Estate Condition Report that complies with the previous version of the statute to a prospective buyer? Section 7 of Act 338 is silent on "furnished to whom," and silence breeds ambiguity. Since the legislature did not clearly answer this question, sellers have an argument that they do not have to furnish a new Real Estate Condition Report if they shared the old one with the public, and buyers have an argument that sellers have to furnish a new Real Estate Condition Report unless the old one was furnished to a prospective buyer.
I provide legal representation to people who are selling their home "for sale by owner," a/k/a FSBOs. If you need help completing a new Real Estate Condition Report, please contact me at rudolphkuss@stevensandkuss.com.
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