Pennsylvania’s Real Estate Seller Disclosure Law ensures that most home buyers are made aware of serious structural problems, water damage or infestations before purchasing a home.
What Has To Be Disclosed When Selling A House?
According to Pennsylvania law (68 Pa.C.S. §§7301-7314):
“any seller who intends to transfer any interest in real property shall disclose to the buyer any material defects with the property known to the seller”
In short, Pennsylvania law obligates home sellers to disclose information on known “material defects” prior to the sale of property. Before you sign any closing documents, the seller (or, in practice, often the seller’s real estate agent) is required by law to provide prospective home buyers with a lengthy seller’s disclosure statement, outlining any major defects on the property.
This disclosure isn’t meant to replace the home inspections that many buyers opt for prior to a sale. Nor does it constitute a warranty in any sense. Warranties and inspections are additional protection measures that home buyers take of their own accord – not legal requirements.
What Is A “Material Defect”?
Here’s how Pennsylvania law defines a “material defect”:
“a problem with a residential real property or any portion of it that would have a significant adverse impact on the value of the property or that involves an unreasonable risk to people on the property.”
As the law makes explicit, a material defect is one that would seriously devalue the property or create an unreasonable risk of harm to people on the property. Note that “people on the property” in this context could extend well beyond the home’s actual occupants.
Also keep in mind that this requirement only applies to major problems that are “known” to a seller. If a material defect remains unknown to the seller, Pennsylvania law requires only that the seller “make a disclosure based on the best information available to the seller.” In other words, the law does not require home sellers to go out of their way, hunting for material defects that have yet to be discovered.
With that being said, the law clearly prohibits any misrepresentations of fact: “the seller shall not make any representations that the seller or the agent for the seller knows or has reason to know are false, deceptive or misleading.” In addition, there is an absolute prohibition on failing to disclose known material defects.
Normal Useful Life
The fact that a structural element or subsystem of the home is approaching – or has even exceeded – the end of its “normal useful life” isn’t always considered a material defect under Pennsylvania State law.
“Normal useful life” is a term used by accountants and appraisers when they determine the value of assets. In practice, the normal useful life of an asset is equal to the amount of years, on average, that it will be used before being put out of service and replaced with a newer model. Keep in mind that something’s “normal useful life” doesn’t always end when it breaks. Sometimes, homeowners can elect to upgrade an asset, even though their current model would still work for a number of months or years. Many appraisers take such voluntary replacements into account in calculating the normal useful lives of items.
The concept of a “normal useful life” comes in especially handy when we’re considering the value of a leased item. We want to make sure that the item’s value, which includes how long we can expect to use it, is more than what we’ll pay in monthly installments for the course of a lease agreement.
Spotting Material Defects In A Home
Homes have normal useful lives, too, as do the components and appliances that make up a dwelling. Asphalt shingles, for example, usually last around 20 years, Improvement Center reports, while noting that higher-quality versions can be warrantied up to 50 years.
In any event, the mere fact that a home’s asphalt shingles have exceeded the upper bound of their normal useful life doesn’t constitute a material defect under Pennsylvania law. Only defects that have a significant impact on a property’s value or create an unreasonable risk of personal harm are considered “material.” So if the old shingles are likely to allow for water penetration, which would lower the property’s value, that could reasonably be considered a material defect.
Some material defects involve code violations. Excessively-wide balusters on a staircase, which present a safety hazard for young children, are often considered a material defect, even though the staircase itself was originally constructed in defective condition.
How Are Serious Problems Reported?
In order to disclose the existence of “material defects,” home sellers in Pennsylvania are required to complete a property disclosure statement. To check out a sample disclosure form, visit the Pennsylvania Department of State website here.
This statement, promulgated by the State of Pennsylvania’s Real Estate Commission, represents the minimum amount of disclosure required from home sellers. Sellers have every right to use a disclosure form that is more detailed. At the least, a home seller’s disclosure should include important information on:
- Occupancy – Does the seller currently occupy the home? If not, when did the seller last occupy the dwelling?
- Roof – When was the roof first installed? Has the roof been replaced or repaired during the seller’s ownership? Has the roof ever leaked? Is the seller aware of any problems with the gutters or downspouts?
- Basements and Crawl Spaces – Is the property equipped with a sump pump? Has any water leakage, moisture accumulation or dampness occurred in the basement or crawl space? Have any repairs intended to control potential water damage been undertaken in the basement?
- Termites, Insects, Dry Rot and Pests – Is the seller any termites, other wood-destroying insects, dry rot or pests that affect the property? Have any insects or pests caused damage on the property? Is the property currently under contract with a licensed pest control company? Have any termite or pest control reports or remediation projects occurred during the last five years?
- Structural Items – Is the seller aware of any past or present water leakage? Have any walls, foundations or other structural elements moved, shifted or deteriorated in the past or present? Are there any known problems with the property’s driveway, walkways, patio or retaining walls?
- Additions and Remodeling – Has the seller made any additions, structural changes or other alterations to the property?
- Water and Sewage – Where does the property’s drinking water come from? If the water comes from a public source, when was the last time the water was tested and what were the results? Is the water pumping system in working order? Is the property equipped with a softener, filter or other water purification system? What type of sewage system is used on the property? Is there a sewage pump and, if so, is it in working order? When was the septic system or cesspool serviced last? Is the water or sewage system shared by other properties? Is the seller aware of any leaks or backups related to the property’s plumbing, water system or sewage system?
- Plumbing System – Is the property’s plumbing system copper, galvanized, lead, PVC or another material? Is the seller aware of any problems with plumbing fixtures?
- Heating and Air Conditioning – Does the property have A/C and, if so, is it central electric, central gas or wall units? How many air conditioning window units will be included in the sale, if any? Which areas of the property, if any, are not air conditioned? What kind of heating system is the property equipped with? Are there any underground fuel tanks located on the property? Is the seller aware of any problems with the property’s heating and / or air conditioning systems?
- Electrical System – Is the seller aware of any problems or necessary repairs in the property’s electrical system?
- Other Equipment and Appliances – Are any of the following items being included in the sale: electric garage door openers, smoke detectors, security alarm system, lawn sprinklers, swimming pool, spa, hot tub, refrigerator, range, microwave, dishwasher, trash compactor, garbage disposal, washer, dryer, intercom system or ceiling fans? If so, are there any known problems with these items? Are any of the items in need or repair or replacement?
- Land, Soils and Drainage Boundaries – Is there any fill or expansive soil on the property (soils that shrinks and swells with moisture content can damage a property’s foundations)? Has any sliding, settling, upheaval or movement of earth occurred or otherwise affected the property? Is the seller aware of any existing or proposed mining, strip mining or other excavations that could affect the property? Is the property (or a portion of the property) located in a flood zone or wetlands area? Have any past or present drainage or flooding problems affected the property? Does the seller about any encroachments, boundary line disputes or easements on the property? Is the seller aware of any shared or common areas on the property, like driveways or docks? Are there any shared maintenance agreements with other property owners?
- Hazardous Substances – Is the seller aware of any underground tanks or hazardous substances on the property, like asbestos, radon or lead paint? Has the property been tested for hazardous substances? Are there any other environmental concerns that might impact the property?
- Condominiums and Homeowner Associations – Will the home buyer become subject to the restrictions and requirements of a condominium or homeowner association?
- Miscellaneous and Legal Concerns – Is the seller aware of any outstanding or threatened legal actions that could impact the property? Do any violations of Federal, State or local law or regulation relate to the property? Are there any public improvement, condo or homeowner association assessments that remain unpaid? Does the seller know about any violations of zoning, housing, building safety or fire ordinances that have not yet been corrected? Are there any court judgments, encumbrances, liens or other debts against the property that cannot be satisfied using the proceeds of its sale? Is there any reason, including a defect in title, that would prevent the seller from giving a warranty deed or conveying title to the property? Are there any material defects that have not been disclosed elsewhere in the disclosure statement?
Again, the disclosure statement is thorough, but does not require that sellers pro-actively search for material defects on the property. In the event that something changes, making information on the disclosure inaccurate, the seller is required to notify buyer as soon as reasonably possible.
What Do We Do The Seller’s Disclosure Is Wrong?
Home sellers are legally obligated to complete their disclosure documents to the best of their knowledge. Inaccuracies in disclosure don’t automatically invalidate the transfer of residential real estate, but when a seller intentionally or negligently violates the provisions set forth in Pennsylvania law, they can be held liable for any applicable damages incurred by a buyer.
That liability, however, doesn’t hold universally. Sellers are not liable for errors, inaccuracies or omissions on a disclosure statement if one of these three conditions are satisfied:
- the seller had no knowledge of the error, inaccuracy or omission;
- the seller included the error, inaccuracy or omission because they had a reasonable belief that the undisclosed material defect had already been corrected; or
- the error, inaccuracy or omission was based on information from a public agency, licensed home inspector or contractor and the seller had no knowledge of the error, inaccuracy or omission
In other words, sellers can only be held liable under Pennsylvania’s Real Estate Seller Disclosure Law for knowingly withholding information on material defects in a property. The existence of a material defect isn’t enough to serve as the foundation for a viable civil lawsuit. In particular, sellers cannot be held liable for:
- material defects that were disclosed to the buyer before the signing of an agreement of transfer
- material defects that develop after the signing of the agreement of transfer
- material defects that occur after the final settlement
Real estate agents can only be held liable under Pennsylvania’s seller’s disclosure law if they had actual knowledge of an undisclosed material defect, or actual knowledge of a misrepresentation relating to a material defect.
The State’s disclosure law also establishes a “statute of limitations,” limiting the amount of time home buyers have to file a lawsuit over undisclosed material defects. In Pennsylvania, buyers are limited to two years, beginning on the date of final settlement. Attempt to pursue legal action after the statute of limitations has run out and your case will almost certainly be dismissed.
Does The Seller Disclosure Law Apply To New Construction?
Not universally. In particular, the seller’s disclosure law does not apply to real estate transactions involving new residential construction that satisfy all of the following four conditions:
- the home has not been previously occupied
- the home buyer has received a one-year or longer written warranty covering the construction
- the home has been inspected for compliance with the applicable building codes* or, if there is no applicable code, for compliance with a nationally recognized model building code
- a certificate of occupancy or a certificate of code compliance has been issued for the dwelling
Remember that each of these four conditions must be met, not just one or two. No warranty? In that case, the seller must provide a property disclosure statement, even though the home is brand new construction. There’s one other notable exception to the seller’s disclosure law: when real estate is being transferred by a fiduciary in the administration of a decedent’s estate, guardianship, conservatorship or trust.
Beyond these two exceptions, Pennsylvania’s seller’s disclosure law applies to every residential real estate transfer. There’s only one more wrinkle, which applies to people who plan to sell one or more units in a condominium. Condo owners are obligated to disclose known information about material defects, too, but that requirement doesn’t extend to include common areas or facilities shared by other condo residents, at least not where this particular statute is concerned. A separate law, Title 68 Pa.C.S. §3407, outlines what sellers need to disclose about common elements in a condominium.
*To govern the quality and safety of residential construction, Pennsylvania enforces a statewide building code, usually referred to as the Uniform Construction Code. The standards established in the UCC are closely based on those set forth in the International Code Council’s International Building Code for 2009.
The vast majority of municipalities in Pennsylvania have chosen to enforce these building standards on the local level, using either municipal employees or independent third-party code enforcement agencies. In these towns, cities and villages, the State’s Department of Labor & Industry holds no code enforcement authority. Around 10% of municipalities, however, chose to opt out of this scheme. In these towns and cities, the State enforces building codes itself, but only for commercial properties. Where residential properties in “opt out” municipalities are concerned, property owners or their contractors are responsible for hiring third-party agencies to ensure that all new residential construction has been completed to code.