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Grady v. Sikorski: Disclosure Law Does Not Apply to Property with Uninhabited Structure

An Illinois court has considered whether the seller of a stripped down and unoccupied former residence which the buyer planned to tear down following purchase was required to complete a property condition disclosure form.

Richard Sikorski (“Seller”) owned a property which had formerly been used as a residence but now was unoccupied and stripped of all fixtures, such as toilets, water heater, furnace, etc. The Seller stated that he had bought the property with the intention of tearing the structure down and placing condominiums on the property, but after commissioning a soil report, he decided to sell the property because the property’s soft soil would require the use of pylons when building on the property.

Maureen Grady (“Buyer”) purchased the property from the Seller, also planning to tear down the property’s remaining structure and build a multi-unit condominium building. The Seller did not complete a property condition disclosure for the property because the Seller was selling the property as a vacant lot and so did not believe the state’s property condition disclosure law applied to this transaction. The state law requires sellers of residential property to deliver to prospective buyers a disclosure form listing all known material defects on the property.

During the building process, the Buyer learned of the property’s soft soil and claimed she incurred approximately an extra $60,000 in costs because of the soft soil. The Buyer brought a lawsuit against the Seller for failing to disclose the soft soil as well as for violations of the property condition disclosure law. The trial court ruled that while the property condition disclosure law did apply to this transaction, the Seller did not knowingly violate the law and so there was no liability. The Buyer appealed.

The Illinois Appellate Court affirmed the lower court’s ruling in favor of the Seller, although on different grounds. The court found that the question of whether the property condition disclosure requirements applied to property which was no longer being used a residence and which the buyer had no intention of using a residence was a question that no Illinois court had ever addressed. The statute applies to “residential real property”, which the statute defines as “real property improved with not less than one nor more than 4 residential dwelling units.” The Buyer argued that even though the house on the property was unoccupied, the property retained the characteristics of residential property and thus the requirements of the property condition disclosure statute applied to this transaction.

The court disagreed with the Buyer’s interpretation of the property condition disclosure law. The court found that the purpose of the statute was to advise buyers about the condition of dwelling units on the property. There was no disagreement that the housing unit on the property was not habitable and the Buyer had no intention of living in the structure on the property. The court found that the definition of “residential real property” contained in the property condition disclosure law did not apply to the Seller’s property, since the disclosure requirements served no useful purpose because the Buyer had no intention of using the structure on the property as a residence. Thus, the court ruled that the property condition disclosure statute did not apply to the transaction between the Buyer and the Seller, and so the court affirmed judgment in favor of the Seller.

Grady v. Sikorski, 349 Ill. App. 1 (Ill. App. Ct. 2004).