When selling a home in Illinois, you must make certain disclosures to prospective buyers regarding its physical condition, and that of the entire property. It's a matter of consumer protection, though also a relatively recent one.
Until the year 1994, Illinois law did not require sellers to volunteer information about the property to prospective buyers. Home buyers thus had to ask all the right questions in order to avoid getting saddled with hidden problems, such as frequent flooding or a rodent infestation. Nevertheless, courts often held sellers liable for damages after buyers sued the sellers for having given too little information in response to their questions.
The Illinois legislature sought to cure this confusion by adding seller disclosure obligations to the Illinois statutes. (765 ILCS § 77.) Let's take a closer look at what the present-day statutory disclosure requirements mean for Illinois home sellers, including:
Illinois law requires you, as a home seller, to tell a prospective buyer, in writing, about any material defects on the property that you actually know about. This means anything you're aware of that affects its value, healthfulness, and safety.
This could include things like past flooding and flood risk, unsafe conditions, municipal code violations, environmental issues, boundary line disputes, and defects in specified structures, components, and systems.
You'll make your disclosures 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 you 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. The law applies to conventional sales, installment sales, and sales of property owned by an Illinois Land Trust. (See 765 ILCS § 77/10 and 15.)
You need not complete a disclosure form if you never occupied the property and never had management responsibility for it, nor if you hired someone else to manage it. (See 765 ILCS § 77/5.)
You can't wiggle out of your obligation by agreeing with the buyer to ignore or waive 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).)
The law does not require you to disclose absolutely everything you know about the property. Defects that are not "material" need not be disclosed. If the defect won't affect the value or safety of the property, it's not crucial to mention. (The statutory language is, "'material defect' means a condition that would have a substantial adverse effect on the value of the residential real property or that would significantly impair the health or safety of future occupants of the residential real property unless the seller reasonably believes that the condition has been corrected." See 765 ILCS § 77/35.)
In other words, there's no need to bring up every missing tile or cracked window pane, particularly if they're visible to anyone who visits the house already. Exactly where the line should be drawn 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.
There's also the matter of what you actually "know." You have no duty to go digging around in search of problems, or to obtain an inspection to help you complete the disclosure form. Then again, blinding yourself to obvious problems won't be looked upon kindly if the buyer later sues for nondisclosure. Also, if a defect is listed on an existing inspection report, you should disclose it if it has not been fixed.
Many sellers choose to commission a professional 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.
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 ILCS § 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. Many of the questions ask about "material defects" in the various named structures, components, and systems. Extra space is provided for you to give more information regarding matters for which you check "Yes" or "Not Applicable." It's a good idea to attach a copy of the law itself to the form before delivering it to the buyer.
Your real estate broker might ask you to complete the form when you sign the listing agreement. However, Illinois attorneys recommend getting a legal consultation before delivering the form to a buyer. 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. By signing, you certify that your disclosures are complete and accurate. If you co-own the property with others, all owners should sign the form.
Your signature also authorizes your listing broker or attorney to deliver the form to the buyer. You must do so prior to signing the sales contract. 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 or UPS, with postage or delivery charges prepaid. (See 765 ILCS § 77/50.)
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 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 might present the potential for exposure to radon. The disclosure law does not require the seller to conduct 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 Seller Responsibility to Disclose Lead-Based Paint Hazards. This mainly affects sellers of houses constructed before 1978, which are likely to contain some source of lead, such as lead-based paint or lead pipes.
If you become aware of a defect in the property after delivery of the disclosure, or that you described something incorrectly or forgot to mention a material defect, you must send a supplemental disclosure to the buyer. (765 ILCS § 77/30.)
If you later find out that the disclosure law did not apply to you or to your transaction at all, 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.
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 might be liable to the buyer for actual damages, court costs, and attorney's fees. (See 765 ILCS § 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 can 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 might have a duty to pay for an attorney to defend you.