Illinois Agent Duties to Disclose Material Facts

An Illinois licensee who represents you must disclose to you the material facts concerning the transaction that the licensee actually knows, unless the information is confidential information. A licensee who does not represent you owes you something narrower. If the licensee works for the seller, the Real Estate License Act of 2000 requires timely disclosure of latent material adverse facts about the physical condition of the property that the licensee actually knows and that a reasonably diligent inspection could not find. Those two sentences are the whole structure, and everything below is the detail.

Gambino Realtors has been in business in Rockford since 1923, and disclosure is the part of agency law where a new agent's words matter most. This guide reads the statute section by section, then connects it to the separate seller disclosure law. If you are choosing where to start your career, our guide on how to choose your first brokerage covers the other half of the decision. This is an explanation of what the statutes say, not legal advice. Your sponsoring broker or an attorney confirms how a rule applies to a real transaction.

What A Client Is Owed: Every Material Fact The Licensee Actually Knows

Start with who counts as a client, because the duty to disclose follows that label. The Act defines a client as a person who is being represented by a licensee. A consumer is anyone seeking or receiving licensed activities, and a customer is a consumer the licensee is not representing. Section 15-10 sets the default. Licensees are considered to be representing the consumer they work with as a designated agent, unless a written agreement between the sponsoring broker and the consumer provides for a different relationship. The Act also says every brokerage agreement must be in writing.

The disclosure duty itself sits in section 15-15. Read it slowly, because four separate limits are packed into that one sentence.

The first limit is the subject. The facts must concern the transaction. The second limit is knowledge. The text says actual knowledge. The third limit is the confidentiality exception, which gets its own section below. The fourth limit is a carve-out. Material facts do not include three kinds of things when they are located on or related to real estate that is not the subject of the transaction: physical conditions that do not have a substantial adverse effect on the value of the real estate, fact situations, and occurrences and acts at the property.

Here is the part that surprises people. The Act does not define "material fact." The definitions section does not contain the phrase, and section 15-15 only says what material facts do not include. This guide does not claim to list what a court or the Department of Financial and Professional Regulation would treat as material in any given situation. What the text does give you is a clear process. The licensee asks what they actually know, whether it concerns the transaction, and whether it is confidential information.

An illustration, not a real case. A licensee representing a buyer learns, from a source the licensee trusts, a fact about the property that bears on the purchase. That fact is something the licensee actually knows. The buyer is the client. The fact concerns the transaction. Unless it falls into the confidential category, the statute points toward telling the buyer. Now change one detail. The licensee has only a hunch and has never been told anything. Nothing in section 15-15 turns a hunch into actual knowledge.

Disclosure is only one of the duties in that subsection, and it reads differently next to the others. The same list requires the licensee to perform the terms of the brokerage agreement, to seek a transaction at the price and terms the agreement states or terms the client otherwise finds acceptable, to present all offers to and from the client in a timely way unless the client waived that, and to account promptly for money and property received in which the client has an interest. It also requires obeying the client's specific directions when they are not contrary to statutes, ordinances or rules, acting in the client's best interests rather than the licensee's or anyone else's self-interest, using reasonable skill and care, keeping confidential information confidential, and complying with the Act and every applicable statute and regulation, including fair housing and civil rights laws.

Subsection (e) closes the loop with a sentence that is easy to skim past. "Nothing in the Section shall be construed as changing a licensee's duty under common law as to negligent or fraudulent misrepresentation of material information." In plain terms, the statute's list of duties is not a safe harbor that wipes out the older law on misrepresentation.

There is also a protection running the other way. Under subsection (d), a licensee is not liable to a client for passing along false information that a customer supplied, unless the licensee knew or should have known the information was false.

Finally, the Act says how the duty changes when one licensee ends up on both sides. In a dual agency, section 15-45 says each client and the licensee possess only actual knowledge and information, with no imputation of knowledge among or between clients, brokers, or their affiliated licensees. The statutory consent form tells both clients that the licensee can disclose all latent material defects in the property that are known to the licensee, and that the licensee can disclose the buyer's financial qualification to the seller. For the full rules on consent and the cases where dual agency is not allowed, read our guide Illinois Dual Agency vs Designated Agency Explained.

What A Customer Is Owed: Honesty And Latent Material Adverse Facts

A customer is not represented by the licensee, and section 15-25 governs that relationship. It starts with a flat rule. Licensees shall treat all customers honestly and shall not negligently or knowingly give them false information.

The second sentence of 15-25 adds a duty for one situation only. A licensee engaged by a seller client shall timely disclose to customers who are prospective buyers all latent material adverse facts pertaining to the physical condition of the property that are actually known by the licensee and that could not be discovered by a reasonably diligent inspection of the property by the customer. That sentence has five conditions, and a fact has to meet every one of them.

• The licensee was engaged by a seller client.
• The fact is about physical condition.
• The licensee actually knows it.
• A reasonably diligent inspection by the customer could not discover it.

The word that does the work is "latent." A latent fact is hidden from a reasonable inspection. The Act does not give examples, so this guide will not invent a list. An illustration, not a real case. Suppose a seller's licensee actually knows something about the physical condition of a house that the buyer's inspector would have no way to see. Under 15-25, that is the kind of fact the licensee must disclose in a timely way. A condition that any diligent inspection would reveal does not fit the sentence, because it is not something the customer "could not" discover.

Two protections sit beside the duty. A licensee is not liable to a customer for false information that the licensee's client provided, if the licensee did not have actual knowledge that it was false. And no cause of action arises on behalf of any person against a licensee for revealing information in compliance with the section.

The same chapter of the Act also lists what a licensee does not have to disclose. Section 15-20 says no cause of action shall arise against a licensee for the failure to disclose that an occupant of the property was afflicted with HIV or any other medical condition. It says the same for the fact that the property was the site of an act or occurrence that had no effect on the physical condition of the property or its environment or the structures located on it. It adds fact situations on property that is not the subject of the transaction, and physical conditions on other property that do not have a substantial adverse effect on the value of the property being sold.

Under 15-35(c), a licensee shall disclose in writing to a customer that the licensee is not acting as the agent of the customer. The timing is "at a time intended to prevent disclosure of confidential information from a customer to a licensee, but in no event later than preparation of an offer to purchase or lease real property."

What Stays Private, What Goes In Writing, And What Happens After A Missed Disclosure

The exception to the client disclosure duty is confidential information, and the Act defines it narrowly. It means information obtained by a licensee from a client during the term of a brokerage agreement that meets one of three tests. The client made it confidential by written request or written instruction. It deals with the client's negotiating position. Or its disclosure could materially harm the client's negotiating position. Information stops being confidential if the client permits disclosure by word or conduct, if the law requires disclosure, or if the information becomes public from a source other than the licensee.

The last sentence of the definition is the one to remember. "Confidential information shall not be considered to include material information about the physical condition of the property." A client cannot turn a physical defect into a secret by asking the licensee to keep quiet about it. What stays private is the client's own bargaining position, such as the highest price a buyer would pay or the lowest a seller would take, and anything the client put in writing as confidential. The statutory dual-agency form says the same thing in its list of things a dual agent cannot disclose, including the price or terms a seller will take other than the listing price and the price or terms a buyer is willing to pay, without the client's permission.

Confidential information can still be shared inside the brokerage for the client's benefit. Under section 15-50(c), a designated agent may disclose a client's confidential information to the sponsoring broker or persons the broker specifies, for the purpose of seeking advice or assistance for the benefit of the client. The sponsoring broker or that person may not disclose it further unless the Act requires it or the client who first disclosed it asks for or permits it. Section 15-50(b) adds that the sponsoring broker takes ordinary and necessary care to protect confidential information a client gives a designated agent.

The duties also have an end date. Section 15-30 says that, unless a written agreement between the broker and the client says otherwise, neither the sponsoring broker nor any affiliated licensee owes the client further duties after the brokerage agreement terminates, expires or is completed, with two exceptions. The licensee must still account for all moneys and property relating to the transaction. And the licensee must still keep confidential information confidential. Disclosure of material facts is not on that short list.

The writing requirements are where a missed step leaves a paper trail. A designated agent must advise a consumer in writing, no later than starting work as the designated agent, that a designated agency relationship exists and who the designated agents are. The licensee representing the consumer must also discuss the sponsoring broker's compensation policy, including the terms and any amounts offered to cooperating brokers who represent other parties. When a licensee prepares contemporaneous offers on the same property for more than one client, section 15-15(b) requires written disclosure to all of those clients and a referral to another designated agent for any client who asks. And the Department can discipline a licensee for acting for more than one party in a transaction without written notice to all parties for whom the licensee acts. Those are the written disclosures the statute names.

What happens when a disclosure goes wrong has two layers. First, the Department of Financial and Professional Regulation. Section 20-20 lets the Department refuse to issue or renew a license, place a licensee on probation, suspend, revoke, reprimand, or take other action, and impose a fine not to exceed 25,000 dollars for each violation. The listed causes include making any substantial misrepresentation, making false promises likely to influence, persuade or induce, and dishonorable, unethical or unprofessional conduct of a character likely to deceive, defraud or harm the public. Second, private lawsuits. Section 15-5(c) says Article 15 may serve as a basis for private rights of action and defenses by sellers, buyers, landlords, tenants, managing brokers and brokers, though those private rights of action do not extend to any other Article of the Act. This guide does not say how any claim would come out. It points to where the Act opens the door.

The seller's own disclosure duty lives in a different statute, the Residential Real Property Disclosure Act, and it works alongside the licensee's duties without replacing them. It covers real property with one to four dwelling units, residential cooperative units and condominium units. The seller completes every item of the disclosure report and delivers it to the prospective buyer before the contract is signed. The seller must disclose material defects the seller actually knows about, is not liable for an error the seller had no knowledge of, and is not obligated to investigate. If the seller learns of an error before closing, the seller must give a written supplemental disclosure. A seller who knowingly breaks the Act or states something the seller knows to be false is liable for actual damages and court costs, and a court may award reasonable attorney's fees to the prevailing party. No action under that Act may begin later than one year after the earliest of possession, occupancy or recording of the conveyance. Section 45 says the Act does not limit remedies or change any obligation to disclose that exists under another statute or in common law to avoid fraud, misrepresentation or deceit. Our guide Illinois Seller Disclosure Report in Rockford walks through the form itself. No source read for this guide shows a separate Rockford or Winnebago County rule on agent disclosure, so state law controls.

One housekeeping note on the statute. Each section of the License Act that this guide cites carries a notice that it is scheduled to be repealed on January 1, 2030. Today the sections read as described above. The current text is on the Illinois General Assembly site, ilga.gov.

The Bottom Line

For a customer, the duty is honesty, plus timely disclosure of latent material adverse facts about physical condition when the licensee works for the seller. The Act does not define "material fact," so the word carries weight that a new agent has to take seriously and a sponsoring broker or attorney can help interpret.

Both duties rest on the same habit. Know who your client is, know what you actually know, and put the required disclosures in writing on time. If you are looking for a brokerage to learn those habits under, start with our guide on how to choose your first brokerage. Gambino has been in business since 1923, and new agents get a personal business coach, weekly classes and sales meetings twice a month, and a mentor who goes with them on first appointments. Our related guide Illinois Agency Law for New Brokers: Duties and Dual Agency covers the rest of Article 15, and the Illinois Real Estate Guide lists every article in this series.

A few questions come up again and again on this subject, so here are short answers, each tied to the section that supplies it.

Frequently Asked Questions