Another new year and another round of updated property condition reports.

The WRA publishes five different condition report forms. Three of these are Real Estate Condition Reports (RECRs) that include the mandatory content stated in Wis. Stat. § 709.03. Sellers must complete a RECR and give the buyer a copy whenever property containing one to four dwelling units is being sold. All five condition reports including the ones for vacant land and for commercial property, fulfill the function described in the listing contracts and in Wis. Admin. Code § RL 24.07(1)(b): they are the tools sellers use to provide written information about the condition of the property in response to the listing broker’s inquiries. In turn, these reports are used to disclose property defects to buyers.

The five WRA condition reports include:

• Condition Report (two pages) (WRA-CR): RECR containing the mandatory § 709.03 content with some supplementary information (appearing in italics).
• Seller’s Real Estate Condition Report (three pages) (WRASCR): RECR containing the mandatory § 709.03 content with substantial supplementary information including many examples and prompts (appearing in italics).
• Real Estate Condition Report – Farm (WRA-F): RECR containing the mandatory § 709.03 content, based upon the assumption that a farmhouse is on the property. This form contains some supplementary information (appearing in italics) pertaining to residential issues, and additional supplementary information regarding agricultural and vacant land concerns (also appearing in italics).
• Seller Disclosure Report – Commercial (WRA-RCC): Not a RECR because it is designed for commercial, not residential, property. It shares many items with the other reports, but also contains distinctively commercial items.
• Seller Disclosure Report – Vacant Land (WRA-RV): Not a RECR because it is designed for vacant property purchased for development. It shares many items with the other reports but also contains many items addressing development-oriented concerns.

The revised WRA condition reports designed for use in 2011 were published in late 2010 and have a 2010 copyright.

The WRA just revised its condition reports one year ago. Why is this being done again?  

The Wisconsin Legislature is the culprit! Specifically, the new Wis. Stat. § 709.03(form)C.26.m requires a mandatory RECR disclosure of whether or not the prop¬erty is subject to a shoreland zoning mitigation plan, beginning with RECRs that are furnished to buyers on or after January 1, 2011.

The new disclosure item states: “C.26m. I am aware that the property is subject to a mitigation plan required under administrative rules of the department of natural resources related to county shoreland zoning ordinances, which obligates the owner of the property to establish or maintain certain measures related to shoreland conditions and which is enforceable by the county.”

When must the new reports be used or can sellers still use RECRs completed on the old (2009) forms?  

The key is the date that the RECR is given to the buyer. If the buyer receives a RECR on or after January 1, 2011, it should be (1) on a new (2010) RECR form or (2) on an old (2009) RECR that is supplemented with an addendum, amendment, etc. that adds the shoreland mitigation item C.26.m to the seller’s RECR disclosures.

What happens if in January 2011 a buyer receives a RECR completed on an old form?  

A buyer could rescind the buyer’s offer to purchase based on the right to rescind provisions in Wis. Stat. § 709.05. A prospective buyer who receives a RECR that is incomplete may, within 2 business days after receipt of the RECR, rescind the offer. A rescinding buyer has no liability to the seller and is automatically entitled to the return of any earnest money paid.

The right to rescind is the only remedy provided under chapter 709 so once the two business days have passed, a buyer may have no other remedy unless there is a shoreland mitigation plan that the seller has not otherwise disclosed. The offers to purchase currently undergoing revision at the Department of Regulation and Licensing will include a shoreland mitigation item in the definition of “Conditions Affecting the Property or Transaction,” so a seller might also be in breach of contract if the seller fails to disclose a mitigation plan to the buyer.

Why isn’t there an optional use date and a mandatory use date?  

Optional use dates and mandatory use dates are used by the DRL with regard to state-approved forms. The property condition reports are not DRL forms.

What is the new material regarding managed forest lands?  

New statutory revisions make various changes to the Managed Forest Law (MFL) program administered by the Department of Natural Resources. These changes include providing a process for an MFL owner to receive a withdrawal tax estimate from the Department of Revenue. The newly created Wis. Stat. § 710.12 establishes specific disclosure requirements regarding the sale of real property that will continue to be subject to an MFL order after the sale. The seller must provide written disclosures no later than 10 days after the acceptance of the offer or option contract that explain that MFL orders remain in effect for 25 or 50 years and that the DNR Division of Forestry monitors MFL management plan compliance. The seller must provide Division of Forestry contact information. The disclosure also must contain the following mandatory language: “Changes you make to the property that is subject to an order designating it as managed forest
land, or to its use, may jeopardize your benefits under the program or may cause the property to be withdrawn from the program and may result in the assessment of penalties.”

These disclosure requirements apply to offers accepted on or after January 1, 2011. The WRA has created a separate Managed Forest Law – Seller Disclosure form on zipForm^® for use in making these disclosures. Also look for these disclosures as check-box provisions in the WB-12 Farm Offer to Purchase and the WB-13 Vacant Land Offer to Purchase, currently being updated by the DRL.

Managed forest lands are also referenced on each of the WRA condition reports as a precaution to hopefully bring the issue to the agents’ and parties’ attention. That language states: “I am aware that all, or part, of the property is subject to, enrolled in or in violation of a Farmland Preservation Agreement (see x.x.x.), Forest Crop Law, Managed Forest Law (see disclosure requirement in Wis. Stat. § 710.12), the Conservation Reserve Program or a comparable program.” Each of the programs listed in this disclosure item can potentially trigger stiff penalties, so it is best not to overlook them.

If a property will continue in the MFL program after closing, the listing broker and seller must make sure that either the appropriate disclosure language is given within the offer or the separate Managed Forest Law – Seller Disclosure is executed and furnished to the buyer no later than 10 days after acceptance.

What are the other additions to the condition report forms?  

Piers: To be grandfathered, a pier must meet certain size requirements and, in some situations, be registered with the DNR by April 1, 2011. Because a pier could be considered illegal and thus subject to a DNR enforcement action if it does not meet the state law size and registration requirements, a prospective buyer will likely want to know this prior to purchasing a waterfront property with an existing pier. Accordingly, the WRA added a pier disclosure provision to each of the five WRA condition reports asking if the seller is “aware of a pier attached to the property that is not in compliance with state or local pier regulations. See http://dnr.wi.gov/ for information.”

Carbon Monoxide Detectors: Beginning February 1, 2011, state law requires that all homes with fuel appliances and/or attached garages have carbon monoxide detectors installed on each floor. The WRA RECRs have been modified to add a reference to CO detector laws in disclosure item C.19: “I am aware of defects in a woodburning stove or fireplace or of defects caused by a fire in a stove or fireplace or elsewhere on the property or a violation of applicable state or local smoke detector laws; NOTE: State law requires operating smoke detectors on all levels of all residential properties, and operating carbon monoxide detectors on all levels of most residential properties (see Wis. Stat. §§ 101.149 & 101.647).”

Why were the vacant land and commercial disclosure reports updated when they are not required by statute?  

The WRA believed it was best to keep these reports up-to-date and remind agents and parties of the newest disclosures and the latest developments that might inadvertently trap a party or cause unnecessary problems, expense or delays in a transaction.

Debbi Conrad is Senior Attorney and Director of Legal Affairs for the WRA.

 Editor’s note: The DRL became the DSPS in 2011. Information above may not be current.