The Wis. Stat. § 709.03 residential Real Estate Condition Report (RECR), generally required in real estate transactions involving 1- to 4-family dwellings, is a growing and constantly evolving document. Over the last decade, it has grown longer and the font size has shrunken, much to the consternation of REALTORS® and sellers alike. Each year, real estate transactions become more complicated due in part to new regulations adopted by state and local governments.
The RECR reflects the times. The past era of “buyer beware” is long gone. Consumer protection is a high priority, and seller disclosure is a proven strategy for avoiding liability. The RECR reflects a growing list of the possible problems and conditions a buyer might encounter as well as a reflection of the various “causes du jour” that the Wisconsin legislature and various governmental agencies see fit to insert in the RECR as a topic of needed consumer education. These new regulations often affect the use, tax treatment, or some aspect of property ownership. And then there are those optional items and examples that the WRA blends in with the mandatory language to ensure better compliance and help protect our members and their clients from potential liability.
As we celebrate the 10-year anniversary of Wisconsin Real Estate Magazine, it is only fitting to recap the evolution of the RECR over the last 10 years, highlighting the changes made to the form that sellers were completing when the magazine made its debut.
2002 RECR: guarding against environmental, human and financial dangers
The RECR copyrighted in 2002 included the language and disclosure items required by Wis. Stat. § 709.03, but as has been the practice since the form was first created in 1992, the WRA has added — in italics — supplementary disclosure items and examples of conditions that might appropriately be disclosed. The 2002 RECR included supplementary language regarding the following issues the WRA believed to be important concerns with potentially dramatic consequences for brokers and homebuyers.
Mold: Since some level of mold is present inside and outside of all homes, the presence of mold in a home is not a defect, per se, despite the early 2000s’ panic over “toxic black mold.” Whether mold is a defect depends on the location, quantity, relation to water or moisture sources, and other circumstances. Item C.15 of the RECR relating to potentially toxic and hazardous substances was supplemented to specifically mention mold, and item D.1.e. was added to the WRA RECR forms, prompting the seller to disclose unsafe levels of mold, leaks and other water or moisture intrusions that might lead to mold growing. These items, although renumbered, remain in the RECR today. Although the panic has dissipated, the benefits of full disclosure with respect to water intrusions and unsafe mold has not.
Sex offender notice: Effective June 1, 2001, the Wisconsin Department of Correction’s sex offender registry was available to the public via the Internet and by toll-free telephone. All WRA RECRs were modified to include the sex offender notice language for the protection of the seller.
Use-value assessments: Enacted originally in 1995, the use-value assessment system assesses farmland based on its agricultural productive value rather than fair market value, thus creating a tax break for farmers. A penalty, however, is imposed if the use of the land is changed. Per the 1999-2001 biennial budget, the penalty is imposed upon the person who changes the use of the land rather than the seller. It also required sellers of agricultural land assessed under the use-value system to disclose use-value information to buyers and hence items D.1.b-d regarding use-value assessments appear on the 2002 RECR.
Condominium addendum to RECR
Effective Nov. 1, 2004, a different kind of change was made relative to the RECR: Wis. Stat § 709.02(2) required the seller to provide the buyer with the Condominium Addendum to the RECR in residential condominium transactions along with the RECR.
2009 RECR: disclosing district assessments and conversion fees
After many years without any statutory changes, the legislature directly and indirectly added to the RECR.
Special purpose districts: Effective Nov. 1, 2008, a new item C.24m was added to the RECR stating, “I am aware that the property is located within a special purpose district, such as a drainage district, that has the authority to impose assessments against the real property located within the district.”
Use-value assessments: Due to statutory and terminology changes, the disclosures in items D.1.b-d were modified. Wis. Stat. § 74.485 requires the seller to notify the buyer if the land has been assessed as agricultural land under the use-value law, if the seller has been assessed a “conversion charge” (previously referred to as a “penalty”), and if a conversion charge has been deferred. Following item D.1.d, the WRA RECRs also warn that buyers who change the use of agricultural property assessed under the use-value system may be subject to a conversion charge.
Farmland preservation conversion fees: Beginning July 1, 2009, farmland preservation conversion fees were triggered when land was released from a farmland preservation agreement or when land is rezoned out of a farmland preservation zoning district. These fees are disclosed in supplementary item D.1.e of the WRA RECR.
Offer disclosure items: The following disclosure items appeared in the updated WB-11, but not in the § 709.03 RECR:
- Underground or aboveground fuel storage tanks previously on the property.
- Federal lead-paint disclosure requirements.
- Current or previous animal or insect infestations.
- Land divisions without the required state or local permits.
- Note regarding applicable state or local smoke detector laws requiring operating smoke detectors on all levels of all residential properties.
- High voltage electric (100 KV or greater) or steel natural gas transmission lines.
Any of these disclosure items that did not already appear as supplementary italicized items were added to the WRA RECR forms and other disclosure forms as necessary so that the seller addressed the same disclosure items in the RECRs and in the offer.
2011 RECR: shoreland mitigation, managed forests, piers and CO detectors
Shoreland zoning mitigation: With the Wisconsin legislature again as the culprit, the new Wis. Stat. § 709.03(form)C.26.m required a mandatory RECR disclosure of whether or not the property was subject to a shoreland zoning mitigation plan beginning January 1, 2011. To comply, the WRA RECRs were revised once again, with a 2010 copyright. When a property owner agreed to perform some type of mitigation (determined by the county) in exchange for (a) exceeding impervious surface limits or (b) expanding a nonconforming structure between 35 and 75 feet from the water, these agreements were binding on subsequent buyers.
Managed forest land program: Beginning January 1, 2011, Wis. Stat. § 710.12 required that a seller of property enrolled in the Managed Forest Law (MFL) program provide a written disclosure to the buyer indicating that: (a) the property will continue to be enrolled in the MFL after it is sold; (b) the DNR Division of Forestry monitors the MFL program compliance; and (c) include the following statement: “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.” A reference to § 710.12 was added to the WRA versions of the RECR and other disclosure reports.
Piers: The pier regulations at that time provided that a pier could be grandfathered from future enforcement actions if it met certain size requirements and, in some situations, was registered with the DNR or the local register of deeds by April 1, 2011. The WRA added a disclosure provision to the WRA RECR forms and disclosure reports asking whether the seller was aware of a pier on the property not meeting the state or local pier regulations.
Carbon monoxide detectors: Beginning February 1, 2011, state law required all homes with fuel appliances and/or attached garages to have carbon monoxide detectors installed on each floor. Accordingly, the WRA RECRs and disclosure reports were updated to add an italicized reference to carbon monoxide detectors.
2012 RECR (current)
USTs: The only mandatory statutory change for 2012 involved changing the agency handling USTs named in item C.8 from “Commerce” to “DSPS.”
Farmland preservation conversion fee: The optional item D.1.e relating to the farmland preservation conversion fee was modified to reflect the fact that the rezoning of a property zoned as farmland preservation to another use no longer triggers a conversion fee.
Vacant land disclosure report: Wis. Stat. § 709.033 created mandatory vacant land disclosure provisions, so there was a new Vacant Land Disclosure Report beginning July 1, 2012 for use when the property is land with no buildings.
2014 RECR: upcoming attractions!
The cycle does not end! Expect to see updated RECRs effective July 1, 2014, changing the agency handling USTs named in item C.8 from DSPS to DATCP, and adding a new disclosure item regarding dams.
Debbi Conrad is Senior Attorney and Director of Legal Affairs for the WRA.