This article addresses common WRA Legal Hotline discussions regarding the real estate condition report (RECR), disclosure requirements and property maintenance during a sale. From appliance repairs to water in the basement to the impact of emerald ash borers, these discussions offer insight to help your seller navigate complex disclosure scenarios.

Functioning and non-functioning appliances  

The appliances were working on the date of the offer. Should they also be working until the earlier of closing and/or when the buyer takes occupancy? 

Lines 465-467 of the WB-11 Residential Offer to Purchase provide:

Seller shall maintain the Property and all personal property included in the purchase price until the earlier of closing or Buyer’s occupancy, in materially the same condition it was in as of the date on line 1 of this Offer, except for ordinary wear and tear and changes agreed upon by Parties.

If the appliances were working on the date on line 1 of the offer but were not working when the buyer took occupancy, the buyer could potentially sue the seller for breaching the terms of the offer to purchase. 

At the time the seller completed the RECR, some appliances that might be included in the offer were not in working order. Does the buyer have any recourse?

Per the RECR, the seller would disclose defects regarding the property or the appliances therein. The term “defect” is defined in Wis. Stat. § 709.03 that lays out the contents of the residential RECR:

In this form, “defect” means a condition that would have a significant adverse effect on the value of the property; that would significantly impair the health or safety of future occupants of the property; or that if not repaired, removed or replaced would significantly shorten or adversely affect the expected normal life of the premises.

B9. Are you aware of defects in mechanical equipment included in the sale either as fixtures or personal property?

Mechanical equipment defects may include items such as defects in any appliance, central vacuum, garage door opener, in-ground sprinkler, or in-ground pet containment system that is included in the sale.

If the appliances were not working when the seller completed the RECR and the seller did not disclose this, the buyer could potentially sue for misrepresentation, if that can be proved. 

Previous repairs: to disclose or not to disclose?

A seller had water in the basement, but the seller said they made repairs. The seller asked their listing agent whether the seller is required to disclose this past issue. What should the listing agent advise? Does it matter how long ago the current seller or a previous owner made repairs?

There is no clear statement in the law as to how far back events  that have occurred on the property might need to be disclosed. Whether the seller discloses previous conditions they believe were or may have been repaired is determined on a case-by-case basis.

Pursuant to Wis. Stat. § 709.03, sellers are required to complete the RECR according to their knowledge about defects. The RECR states:

In this form, “aware” means the “owner(s)” have notice or knowledge.

The seller determines whether to include a disclosure about the water in the basement on the RECR. The seller certainly should be encouraged to discuss this with an attorney. The seller or the seller’s attorney — not the agent — decides whether the seller discloses information on the RECR.

Some sellers believe they do not have to disclose an item that has been fixed. In this scenario, the seller may believe the flooding in the basement is not required to be disclosed because it is not a defect due to the fact that the seller believes it has been repaired.

Listing agents should be careful as to how they discuss disclosure of items on the seller’s disclosure report. Agents should not encourage or discourage a seller from making a specific disclosure. Each attorney consulted as to whether an item needs to be disclosed on the RECR may provide a differing legal opinion to the seller. Some attorneys believe sellers should provide a full disclosure — for example, what happened and what was done to repair the issues. Other attorneys believe the seller should be very precise in what they disclose and assist the seller in drafting minimal disclosure. Finally, other attorneys also believe that if an item is not a defect at the time of completing the report, then it is not a defect at all and disclosure is not required.

Arguably, if an agent tells the seller whether to disclose a defect or not, or how to draft the explanation for said disclosure, then the agent is providing legal advice to the seller. This could be deemed legal advice because the RECR provides a definition of defect, and if the agent says to disclose an issue on the form or that it does not require disclosure, the agent is effectively providing a legal interpretation as to when the definition of defect applies. In the situation of the basement flooding, this potentially could lead to liability. 

Emerald ash borer disclosure

Does the presence of ash trees trigger seller disclosure? What about emerald ash borer (EAB) insects? 

Sellers complete the RECR according to their knowledge and the definitions of defects. The statutory RECR in Wis. Stat. § 709.03, in statement C5. and statement G5., provides as follows:

C5. Are you aware of current or previous termite, powder post beetle, or carpenter ant infestations or defects caused by animal, reptile, or insect infestations?

G5. Are you aware of other defects affecting the property? Other defects might include items such as drainage easement or grading problems; excessive sliding, settling, earth movements, or upheavals; or any other defect or material condition?

If the seller is completing a RECR produced by the WRA, the following information is included in C5:

C5. I am aware of current or previous termite, powder−post beetle or carpenter ant infestations or defects caused by animal or other insect infestations, including infestations impacting trees?

If the seller is unaware of the presence of an EAB infestation in trees on the property, the seller may make no disclosure. However, if the seller is aware of an infestation or has information from an arborist regarding infected trees on the property, there may be a disclosure duty. For example, the city of Madison identified EAB in certain areas of the city and marked certain terrace trees for removal. Such information may be disclosed by the seller in the RECR. The seller makes disclosures based upon the seller’s knowledge, information and the advice of the seller’s attorney.  

Consumer questions about real estate law

Is the WRA Legal Hotline available for members of the public to make inquires? What resources can the broker provide to consumers?

The hotline is available for WRA REALTOR^® members as a member benefit. If a consumer has questions, they may be referred to the licensee, the broker of the firm, the Department of Safety and Professional Services, or the State Bar of Wisconsin’s Lawyer Referral and Information Service (LRIS). 

If consumers need an attorney, they may contact the State Bar of Wisconsin’s Lawyer Referral and Information Service (LRIS). When calling the LRIS, a legal assistant helps determine the nature of the potential dispute and can refer attorneys in the caller’s area who have practice in matters related to the potential dispute. They can visit the LRIS online, or they may call 800-362-9082, Monday through Friday, from 8:00 a.m. to 5:00 p.m.