Buying or Selling a Home in Mine Subsidence Affected Areas
There are two statutes in Illinois that pertain to disclosure during the sale of residential property affected by mine subsidence. Both the seller and buyer should be aware of these requirements, and discuss any mine subsidence related disclosure in detail. The first, the Residential Real Property Disclosure Act (765 ILCS 77) states:
Sec. 25 (b) The seller shall disclose material defects of which the seller has actual knowledge.
The Act also requires completion of the Residential Real Property Disclosure Report found in 765 ILCS 77/35.
The second disclosure law is contained in the Mine Subsidence Disclosure Act (765 ILCS 95), which states:
Sec. 3 (a) At the time an agreement to transfer real property is made, the transferor shall disclose in writing to the transferee and lender all insurance claims paid to the transferor for mine subsidence on the real property.
If the seller has received payment from their insurance company on a mine subsidence claim for temporary repairs, an advance payment, or a final settlement payment, the seller must disclose this information to the buyer. Since unrepaired damage may make the home ineligible for mine subsidence insurance coverage, the seller may also wish to provide the following to the buyer:
Copy of letter from insurance company stating damaging ground movement has ended.Copy of insurance company estimate of repair costsCopy of paid bills documenting that repairs have been fully completed
Property with Unrepaired Mine Subsidence Damage May be Ineligible for Mine Subsidence Insurance
As noted above, the Mine Subsidence Statute permits insurance companies to refuse to provide mine subsidence insurance on any property with unrepaired mine subsidence damage.
(215 ILCS 5/808.1)
Sec. 808.1. Right of Insurers to Refuse to Provide Mine Subsidence Coverage. An insurer may refuse to provide mine subsidence coverage on a residence or commercial building evidencing unrepaired mine subsidence damage until such damage has been repaired.
We believe the purpose of Section 808.1 is to encourage property owners to use insurance payments to fully repair damaged property once damaging ground movement has ceased. If the property is sold before repairs are made, the cost of repairs should be one consideration in establishing a price for the property.
Transferring Property During an Ongoing Mine Subsidence Claim
Ground movement from mine subsidence can last many years, sometimes a decade or more. In many instances homes are bought and sold while an active mine subsidence event is taking place.
By statute, all damage caused by a single mine subsidence event, or several subsidence events which are continuous, constitutes one occurrence. This means that if the insurance claim is still open, the company insuring the property when the loss was first reported will continue to service the claim. To facilitate that process, the seller and buyer should consider using an Assignment of Claim Rights. This is a legal document drawn by an attorney for the buyer, and may be used to accomplish the following:
- If at the time of sale the seller has not received any insurance payments for mine subsidence damage, the Assignment transfers seller's rights regarding the covered loss to the buyer.
- If the seller has received some payment, but not exceeding the mine subsidence coverage limit, the Assignment allows the buyer to receive future payments, if any, to compensate for additional loss that may be due.
However, the total amount payable per mine subsidence occurrence to both seller and buyer is subject to the limit on the insurance policy in effect on the date of loss.
The Assignment of Claim Rights entitles the buyer to any future loss payments on an open claim. It is often a necessary component of the real estate transaction when a home is being affected by active mine subsidence. However, if the policy limit has been exhausted, or the full amount of damage has previously been paid to the seller, the buyer will not receive any additional payments.
In addition to the Assignment of Claim Rights, the buyer should request the seller to provide the following information about the mine subsidence claim:
- The amount of mine subsidence insurance coverage on date shown on the Assignment of Claim Rights
- The insurance company estimate of cost to repair mine subsidence damage
- The amount of mine subsidence claim payments already received
If property is transferred during an ongoing mine subsidence claim, the seller and buyer should notify their respective insurance companies and provide a copy of the Assignment of Claim Rights.