On April 16, 2014, Governor Walker signed into law (2013 Wis. Act 304) a new disclosure requirement that seeks to protect buyers and sellers of real estate serviced by a dam. Specifically, the new law is intended to notify buyers and sellers about a state law that could invalidate a real estate transaction if the parties fail to complete a dam transfer application prior to the sale of the property.

Background

With more than 15,000 lakes and 84,000 miles of rivers and streams, Wisconsin has an abundance of water resources. Many of these water bodies have water levels that are controlled by dams, most of which are privately owned. In fact, 60 percent of the 3,800 dams in Wisconsin are owned by private individuals and companies.

Since 1981, Wisconsin law has required buyers and sellers to comply with various financial, maintenance and transfer requirements before transferring ownership of a specific piece of land on which a dam is located. See Wis. Stat. § 710.11.
A dam owner, for example, must be familiar with the legal obligation to maintain a dam in a safe and reasonable condition. The general rule is that a dam owner is responsible for its safety, and liability can be imposed upon a dam owner for failure to maintain, repair or operate the dam in a safe and proper manner. 

To ensure that dams are properly maintained and that the DNR knows who to contact if the dam maintenance requirements are not satisfied, both the seller of property on which a dam is located and the buyer of the property must cooperate to complete a dam transfer application. An inspection is required prior to transferring the property and dam, as well as any repairs needed to bring the dam into compliance with safety standards. The buyer must show financial capability to maintain the dam, and a permit may be required. If dam transfer requirements are not met, the real estate transaction may be nullified.

Despite the harsh consequences for failing to complete a dam transfer application, many property owners, attorneys and REALTORS^® were unaware of this requirement and, as a result, some transactions have been nullified. 

New law

To ensure that all parties to a real estate transaction are aware of this law, Act 304 amends Wisconsin’s Real Estate Condition Report (RECR) and Vacant Land Condition Report (VLCR) to include a disclosure notifying the seller and buyer of the requirement to complete a dam transfer application prior to transferring ownership in property on which a dam is located. 

Beginning on July 1, 2014 (the effective date of the new law), the new language in the RECR and VLCR will state:
"I am aware that a dam is totally or partially located on the property or that an ownership in a dam that is not located on the property will be transferred with the property because it is owned collectively by members of a homeowners association, lake district, or similar group. (If “yes,” contact the Wisconsin Department of Natural Resources to find out if dam transfer requirements or agency orders apply.)"

Why this new law is important to REALTORS^® 

In summary, the new disclosure requirement is important to all parties associated with a real estate transaction, including REALTORS^®, for the following reasons:

• Unaware of current law: Buyers and sellers are often unaware of the current law that requires a dam transfer application to be completed prior to the time of sale.
• Penalties are harsh: Failure to complete the transfer form can result in significant litigation costs and ultimately a nullification of the transaction. 
• Increased compliance: Adding a notice to the RECR and VLCR will help buyers and sellers become more aware of this requirement, which will hopefully result in greater compliance. 

If you have questions about the new disclosure requirement, please contact Tom Larson at tlarson@wra.org or at 608-240-8254.

Tom Larson is Vice President of Legal and Public Affairs for the WRA.