Real Property Disclosure Act

If you have bought or sold a home in Illinois, you are most likely aware of the Residential Real Property Disclosure Act. The Act has two main provisions.

The first is a provision requiring that everyone selling residential property with one to four dwellings on it must disclose to prospective buyers certain defects in the property by completing and signing a 22-question disclosure form. A seller must disclose all defects that he actually knows are present on the property as of the date of completing the form. Although a seller does not have to make his own investigation or inspection of the property in order to fill out the form, he must supplement the disclosure form in writing if he learns of a mistake or if he left something out on the document before the date of the closing of the sale.

Even after a supplemental disclosure, the buyer does not have a right to terminate the real estate contract unless the seller had actual knowledge of the defect at the time when he first completed the disclosure form. However, most real estate contracts provide for an inspection of the property prior to closing to determine that the property has not changed since the contract was signed. If the mistake or omission revealed is not corrected by the date of this inspection, the buyer will have the right to demand such a repair prior to the closing.

The disclosure form includes a warning that disclosures do not include previous problems with the property if the seller reasonably believes that they have been corrected; it reports only the current condition of the property. This resolves the question asked by many sellers regarding their obligations in completing the disclosure form: "Do I have to include things that have been fixed such as the air conditioning?" Hopefully, this warning will encourage more buyers to use professional home inspectors to determine any potential defects in the home.

A buyer has the right to cancel the contract if the seller does not provide the disclosure form before the closing. A "seller" is defined as every person or entity who owns the property, including a beneficiary of a trust. A person who has never occupied the property and who has never had control over the property is not considered a seller. A seller who does not comply with the Act will be responsible for paying damages to the buyer, court costs, and possibly the buyer's attorney's fees.

The second provision is relatively new and calls for the creation of a database to provide information about predatory lenders. Although right now the database includes only certain areas of Cook County, it requires lenders to submit certain information about borrowers, and the state determines if the borrower requires credit counseling. The purpose of this provision is to reduce the number of defaults on loans and to make sure that borrowers are not being taken advantage of by unscrupulous lenders.

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