In California, the required disclosures when selling in real estate include any material facts that are known to the seller that may affect the value or desirability of the real estate. California law only imposes a duty to disclose known defects on sellers.
In other words, they are under no obligation to search out defects or have a home inspection or other expert examine for defects. In addition, California law requires that sellers provide a natural hazard disclosure statement that informs potential buyers if the property is located in certain risk areas. These include an earthquake fault zone, flood zone, or other designated hazard zone.
How Are Flood Hazard Areas Related to Real Estate Transactions In California?
In the State of California, sellers or their real estate agents have a duty to disclose to prospective buyers that a property is located in a flood hazard area. This information is categorized as a material fact because its disclosure is likely to affect a buyer’s decision in whether or not they go through with the property transaction.
This specific material fact may also affect a buyer’s ability to obtain financing. For example, if a piece of property is located in a designated flood area, a lender will likely require a buyer to purchase hazard and flood insurance policies.
Hazard and flood insurance policies are supplemental insurance policies that mortgage lenders in certain areas may require buyers to purchase in addition to their standard homeowner’s insurance. The main difference between the two types of insurance policies is that hazard and flood insurance only covers damages that affect the structure of a home.
In contrast, homeowner’s insurance covers:
- Any damage to both the inside and outside of the house, including personal items;
- Incidents of theft and medical bills;
- Legal costs related to a personal injury lawsuit if an individual is injured while visiting the home.
What Are Flood Hazard Areas?
One of the potential issues of concern for California home buyers is the possibility of flooding in some areas of the state. As noted above, because of the numerous flood hazard areas in California, sellers and their real estate agents are responsible for disclosing to prospective buyers whether a particular parcel of property is located in an assigned flood hazard area.
A flood hazard area is a location that has been identified by the federal government to be an area that is subject to:
- Flooding;
- Mudflows;
- Flood-related erosion hazards, such as weakening of the soil, which may lead to building collapses.
The Federal Emergency Management Agency (FEMA) is the federal government agency that is responsible for maintaining an updated list of these types of areas by creating Flood Insurance Rate Maps (FIRMs) and Flood Hazard Boundary Maps (FHBMs). It is important to note that these maps are constructed from satellite data, meaning they may not be entirely accurate.
Prospective California buyers should confirm with their insurance company that they are not purchasing a home in a designated flood hazard area. An individual may have purchased a home in a flood hazard area, and the seller or real estate agent did not disclose this fact prior to purchase. If that is the case, a buyer may be able to bring a lawsuit against them to recover any damages they have suffered as a result of purchasing a home in a flood zone.
What Is a Special Flood Hazard Area (SFHA)?
Special Flood Hazard Areas (SFHAs) are areas defined by FEMA that have a 1% chance of being flooded or exceeding this percentage in a given year. This percentage may be referred to as the base flood or 100-year flood area in the FEMA National Flood Insurance Program (NFIP).
SFHAs also have zone names, such as Zone AE or Zone AO, that are based on the severity of the flood hazard in a certain area. For example, a flood hazard area that is located in Zone B or Zone X are moderate flood hazard areas, which means they have a 0.2% annual chance of being flooded or are in a 500-year flood area.
In addition, an individual who owns a property located in an SFHA will be required by law to buy flood insurance. This is due to the fact that FEMA has determined that structures located in these areas have a 26% chance of suffering flood damage over the course of a standard 30-year loan and are, therefore, a liability to lenders.
Does a Seller Have to Disclose Flood Zones?
California property owners are required to follow state flood hazard disclosure laws when they are selling or renting their property. Owners and real estate agents are required to comply with these laws when one of the following conditions exist:
- The seller or the seller’s agent knows that the property is located in a flood hazard area;
- The property can be identified on the list that is compiled by a local government agency of properties in designated flood hazard areas, and notice of these properties has been posted at the local offices of the county:
- Recorder;
- Assessor;
- Planning agencies.
There are, however, some exceptions that may apply. For example, if the seller or their agent can prove that the property is not, in fact, located in a flood hazard area or if the party involved does not meet the definition that is provided in a separate section of the Civil Code of Individuals who are required to follow the disclosure requirements.
California law also requires that certain language be included in a tenant’s lease who is renting property in an affected area. There are also separate disclosure requirements, for example, for owners who carry flood insurance for rental properties or have received written notice from a public agency that their rental property is located in a flood hazard area.
When Can a Seller or Real Estate Agent Be Sued for Failure to Disclose Flood Zone?
Failing to disclose that a property is located in a flood zone may lead to serious legal consequences. Sellers or buyers who are required to make these disclosures and willfully or negligently fail to do so may be held liable for the amount of damages that were suffered by the buyer.
In addition, if the seller or agent acted maliciously in concealing information regarding the flood hazard area, a buyer may also be able to recover punitive damages. In very rare cases, a buyer may request to rescind or cancel the real estate purchase agreement, and the seller will be forced to take the property back and return the buyer’s money.
Do I Need a California Attorney if It Was Not Disclosed to Me That the Home I Purchased Is in a Flood Hazard Area?
If you purchased a home and it was not disclosed to you that the home is in a flood hazard area, it is essential to consult with a California real estate lawyer. Your lawyer can advise you of your legal rights as a buyer and your potential options for legal recourse.
Your attorney will likely already be familiar with the locations of flood hazard areas in your area and can help determine if you have a viable claim. In addition, your lawyer can file a lawsuit against the proper party, assist you in gathering evidence, and provide representation in court on the matter.
