When selling a home in Illinois, you must make certain disclosures to prospective buyers regarding the physical condition of the property. This is based on a relatively recent law -- which went into effect in 1994 -- and replaced prior court decisions that both sellers and buyers found confusing.
The old Illinois law did not require sellers to volunteer information about the property to prospective buyers, but often held a seller liable for damages for giving too little information in response to buyers’ questions. Home buyers had to ask all the right questions to be entitled to information about the property from the seller.
Let’s take a closer look at what the present-day statutory disclosure requirements mean for Illinois home sellers.
Illinois law requires you, as a seller, to tell a prospective buyer, in writing, what you know about the quality, healthfulness, and safety of your property. This includes things like past flooding and flood risk, unsafe conditions, municipal code violations, environmental issues, boundary line disputes, and material defects in specified structures, components, and systems.
You must make these disclosures prior to signing the sales contract, on a standard form that’s discussed below. The disclosure is not meant to serve as a warranty or substitute for inspections, but to put the buyer on an equal footing with the seller during contract negotiations.
The Illinois Residential Real Property Disclosure Act applies to “sellers” of “residential real property.” Both terms are defined in the law: “Residential real property” is property improved with one to four residential dwelling units, or an individual condominium or cooperative unit. A “seller” is any owner or any beneficiary of a trust that owns the property.
You are not required to complete a disclosure form if you never occupied the property and never had management responsibility for the property, nor hired someone else to manage it. (See 765 Ill. Comp. Stat. § 77/5.) The law applies to conventional sales, installment sales, and sales of property owned by an Illinois Land Trust. (See 765 Ill. Comp. Stat. § 77/10.)
The buyer and seller cannot agree to ignore the disclosure requirement, not even if the buyer signs a contract agreeing to purchase the property “as is” (in its current condition), nor if the buyer already knows about the defects. You, the seller, must make disclosures regardless, and even if the property is a tear-down -- unless it is uninhabitable as a residence at the time of the sale. (See the case of Grady v. Sikorski, 349 Ill. App. 3d 774 (Ill. App., 2004).)
Certain types of transfers of real property are exempt from disclosure, mainly where the buyer would not expect the seller to be liable for the property’s condition. Generally, a seller does not have to make disclosures if transferring the property as part of a lawsuit such as a divorce, bankruptcy, or mortgage foreclosure, if distributing property from an estate, or if transferring the property to a close family member.
The law does not require you to disclose absolutely everything you know about the property. You are required to answer the questions on the standard “Residential Real Property Disclosure Report” form, the language of which comes directly from the law. (See 765 Ill. Comp. Stat. § 77/35.) Your real estate broker or attorney will be able to provide you with a printed version of the form and help you complete it.
All of the required disclosures are listed on the form as “Yes,” “No,” or “Not Applicable” questions. Extra space is provided for you to give more information regarding matters for which you check “Yes” or “Not Applicable.” You should attach a copy of the law itself to the form before delivering it to the buyer.
Many of the questions ask about “material defects” in the various named structures, components, and systems. As the statute explains, material defects are conditions that substantially impair the property’s value or the health or safety of occupants. Defects that are not material need not be disclosed in those questions. Exactly where the line should be drawn on what requires disclosure can be difficult, however, to determine. When in doubt, it’s often better to disclose an issue than not. You’ll increase buyer confidence and avert anger and possibly lawsuits later on.
Your real estate broker may ask you to complete the form when you sign the listing agreement. However, Illinois attorneys recommend you get a legal consultation before delivering the form to a buyer. This could be to your benefit, because the lawyer might discover that the law does not apply to you, or to the particular type of property or transfer, or can help you decide whether a defect is material.
You must sign and date the form. When you sign the form, you are certifying that your disclosures are complete and accurate. If you co-own the property with others, all owners should sign the form.
Your signature on the form also authorizes your listing broker or attorney to deliver the form to the buyer. If you deliver the form yourself, you should send it to an address or fax number provided by the buyer or indicated on the contract, by messenger, fax, first class U.S. mail, or an alternative delivery service such as FedEx, with postage or delivery charges prepaid. (See 765 Ill. Comp. Stat. § 77/50.)
You have no duty to obtain an inspection to help you complete the disclosure form. That’s because you need disclose only those defects within your actual knowledge. If a defect is listed on an existing inspection report, you should disclose it if it has not been fixed.
Many sellers do, however, choose to conduct an inspection before putting their property on the market. That allows them to price the property accurately, fix some defects rather than having to disclose them, and know what they’re in for when the buyers do their inspections. Again, you’ll need to disclose any material defects discovered in the course of such inspections that you do not fix before offering the property for sale.
If you become aware of a defect in the property after delivery of the disclosure, you must send a supplemental disclosure to the buyer. (765 Ill. Comp. Stat. § 77/30.)
If you complete a disclosure form, and later find out that the disclosure law did not apply to you or to your transaction, or that a defect you disclosed in the form was not required to be disclosed, either you or your attorney can write to the buyer or the buyer’s attorney, and tell them that the form was incorrect. You should also state in the letter that the form is void.
This helps guard against the possibility of later lawsuits -- providing a reminder to the buyer that you didn’t really need to make any disclosures at all, so suing you over incomplete or erroneous disclosures is likely to go nowhere.
If you fail to deliver the disclosure, the buyer may terminate the contract at any time before closing. If you knowingly deliver a disclosure that is incorrect or incomplete, you may be liable to the buyer for actual damages, court costs, and attorney’s fees. (See 765 Ill. Comp. Stat. § 77/55.) You may be held liable for false statements in a disclosure even if the buyer knew about the defects, although the buyer’s knowledge may serve to reduce a damage award.(See Coughlin v. Gustafson, 772 N.E.2d 864 (Ill. App., 2002).)
If the buyer sues you for negligent, rather than intentional, misrepresentation on a disclosure form, your homeowners’ insurance carrier may have a duty to pay for an attorney to defend you.
The Illinois Radon Awareness Act, 420 ILCS 46/1 et seq., requires you to give two pamphlets about radon hazards to the buyer before the contract is signed. The first pamphlet is from the Illinois Emergency Management Agency and is entitled Radon Testing Guidelines for Real Estate Transactions.
The second pamphlet is the Illinois Disclosure of Information on Radon Hazards and is copied exactly from the law at 420 ILCS 46/10, stating that the property may present the potential for exposure to radon. The disclosure law does not require the seller to conduct any radon testing or mitigation; however, many Illinois form real estate contracts include these requirements.
Federal law requires disclosure of potential lead paint and other lead hazards, as described in “Required Disclosures When Selling U.S. Real Estate.”
For further information on Illinois and federal real property sale disclosure requirements, consult an experienced real estate attorney.