Natural hazard disclosures are a requirement of all California home sale transactions. Natural hazard disasters include the following:

  • Flood
  • Fire
  • Earthquake fault zone
  • Seismic hazard zones

The seller must disclose whether the home falls within any of these areas.

What is Required in a Natural Hazard Disclosure Statement?

A natural hazard disclosure statement will state if the residential property lies within one or more of six statutorily specified areas:

  • A special flood hazard area, as designated by the Federal Emergency Management Agency.
  • An area of potential flooding in the event of a dam failure, as designated by the state Office of
    Emergency Services.
  • A very high fire hazard severity zone, as designated by the California Department of Forestry and Fire Protection.
  • A wildland fire area that may contain substantial forest fire risks and hazards, as designated by the State Board of Forestry.
  • An earthquake fault zone as designated by the State Geologist.
  • A seismic hazard zone as designated by the State Geologist.

The disclosure law includes a Natural Hazard Disclosure Statement checklist. The statement warns prospective buyers that the hazards may limit their ability to develop the property, obtain insurance, or receive assistance after a disaster. The statement also advises buyers and sellers that they may wish to obtain professional advice regarding the hazards.

What Happens if a Natural Hazard is Not Disclosed?

Any person who willfully or negligently fails to make the required natural hazard disclosure is liable in the amount of actual damages suffered by the buyer. This is particularly important if insurance proceeds for a natural hazard are inadequate or nonexistent as the buyer can seek damages from the seller and seller’s agent directly. However, failure to disclose does not invalidate the contract.

How Do Natural Disasters Affect Home Sales?

Natural disasters and man-made catastrophes tend to have a “chilling” effect on the real estate market. While the natural disasters have a localized effect, they can have an immediate impact on home buyer confidence. They can also stall mortgage operations, which hurts home sales.

For example, Hurricane Katrina killed more than 1,800 people and displaced approximately 750,000 households. Four years later, homes sales had dropped 23 percent. The same was true after the San Francisco earthquake in 1989. Mortgage operations came to a standstill because lenders were unable to process loans and fearful buyers pulled out of transactions.

Do I Need a Lawyer?

Real estate transactions are very complex and laws vary from state to state. A real estate attorney can help you understand exactly what kind of defects must be disclosed. A real estate lawyer can also represent you in court.