Prospective buyers should always perform due diligence on a property before signing an official contract to purchase a house. One potential issue of concern that California homebuyers should be wary of is the possibility of flooding in certain areas of the state.
Due to the prevalence of flood hazard areas in California, a seller and/or their real estate agent are responsible for disclosing to a prospective buyer whether a particular parcel of property is located in an assigned flood hazard area.
In general, a flood hazard area can be defined as a location that has been identified by the federal government to be an area that is subject to flooding, mudflows, and/or flood-related erosion hazards (e.g., weakening of the soil, which can lead to building collapses).
The Federal Emergency Management Agency (“FEMA”) is the federal government agency responsible for maintaining an updated list of such areas throughout the nation by creating Flood Insurance Rate Maps (“FIRMs”) and Flood Hazard Boundary Maps (“FHBMs”).
However, since these maps are constructed from satellite data, they are not entirely accurate and they may not cover specific plots of properties. Therefore, in addition to checking such maps, prospective buyers should also confirm with their insurance companies that they are not purchasing a home in a designated flood hazard area.
Finally, if you find out that the home you purchased is located in a flood hazard area and the seller and/or their real estate agent did not disclose this fact to you before the purchase, then you may be able to bring a lawsuit against them to recover any damages you have suffered as a result of purchasing a home in a flood zone.
How Are Flood Hazard Areas Related To Real Estate Transactions In California?
In California, a seller and/or their real estate agent has a duty to disclose to a prospective buyer that a home is located in a flood hazard area. This information is known as a material fact because its disclosure will likely affect a buyer’s decision in whether or not they go through with the property transaction.
This specific type of material fact will also likely affect a buyer’s ability to obtain financing. For example, if a plot of property is located within a designated flood area, a bank or mortgage lender will probably require the buyer to purchase hazard and flood insurance policies.
Hazard and flood insurance policies are supplemental types of insurance that a mortgage lender in certain areas may require a buyer to purchase in addition to their standard homeowners’ insurance. The primary difference between the two kinds of insurance policies is that hazard and flood insurance only covers damages that affect the structure of a house.
For instance, if a buyer lives in an area where there are lots of hurricanes, a lender may request that they purchase this kind of insurance to pay for the costs to rebuild or to repair the buyer’s home in the event of a destructive hurricane. Hazard and flood insurance policies tend to cover damages caused by natural disasters like floods, hail, tornadoes, and smoke.
In contrast, homeowner’s insurance will cover any damages both inside and outside of the home, such as personal items, as well as from an incident of theft and medical bills or legal costs related to a personal injury lawsuit if someone is injured while visiting the home.
Finally, it is important to keep in mind that the type of insurance coverage provided can vary by policy and location. Thus, the damages that are included under one hazard and flood insurance policy may differ from what a separate insurance company’s policy may offer.
What Is a Special Flood Hazard Area (SFHA)?
A Special Flood Hazard Area (“SFHA”) is a term that FEMA uses to define areas that have a 1% chance of being flooded or exceeding this percent in a given year. This percentage is sometimes referred to as the base flood or 100-year flood area in FEMA’s National Flood Insurance Program (“NFIP”).
SFHAs also have designated zone names (e.g., “Zone AE”, “Zone AO”, etc.) that are based on the severity of the flood hazards in a particular area. For example, flood hazard areas located in Zone B or Zone X are moderate flood hazard areas, meaning they have a 0.2% annual chance of being flooded or are known as a 500-year flood area.
Additionally, an individual who owns property in a SFHA will be required by law to purchase flood insurance. This is because FEMA has discovered that structures located in these areas have a 26% chance of suffering flood damage over the course of a standard 30-year loan. Thus, they are a liability to lenders.
Does a Seller Have to Disclose Flood Zones?
California property owners must abide by state flood hazard disclosure laws when selling or renting their property. Specifically, an owner and/or their real estate agent will be required to comply with these laws when one of the following conditions are met:
- The seller or the seller’s agent has actual knowledge that a property is located in a flood hazard area; or
- The property can be identified on the list compiled by a local government agency of properties in designated flood hazard areas and notice of such properties has been posted at the local offices of the county recorder, assessor, and planning agencies.
However, there are some exceptions that may apply to the general conditions outlined above, such as if the seller or their agent can prove that the property is not in fact located in a flood hazard area, or if the person does not meet the definition provided in a separate section of the Civil Code of those individuals who must abide by disclosure requirements.
Additionally, as of July 2018, California law mandates that certain language must be included in a tenant’s lease who is renting property in an affected area and has also created separate disclosure requirements, such as 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?
A failure to disclose flood zones can lead to serious legal consequences. Specifically, any seller or buyer who is required to make such disclosures and willfully or negligently fails to do so, can be held liable for the amount of damages suffered by a buyer. Also, if the seller or an agent acted maliciously in concealing information regarding flood hazard areas, then a buyer may be able to recover punitive damages as well.
In extremely rare instances, a buyer may also request to rescind the real estate purchase agreement. If granted, this means that the seller will be forced to take back their property and return the buyer’s money.
Do I Need An California Attorney If It Was Not Disclosed To Me That The Home I Purchased Is In A Flood Hazard Area?
A seller or their real estate agent is required by law to disclose to a buyer whether a particular parcel of property is located within a flood hazard area or not. Failure to disclose this information to a buyer will most likely render them liable for negligence and any damages (e.g., increased insurance costs) that result from causing a buyer to unknowingly make a purchase in such an area.
Therefore, if you have recently purchased a home in a location that is considered a flood hazard area, then you should speak to a California real estate lawyer immediately to learn more about your legal rights as a buyer and your potential options for legal recourse.
An experienced real estate lawyer will already be familiar with the locations of flood hazard areas in your county and can determine whether you have a viable claim. Your lawyer can also help you to prepare and file a lawsuit against the offending party, can assist you in gathering compelling evidence, and can provide representation in court on the matter. Additionally, your lawyer can make sure that you receive any damages that you may be owed.