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.

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