REAL PROPERTY SALES:
NEW DISCLOSURE REQUIREMENTS
(2000)

 Effective June 1, 1998, sellers of real property must now disclose to the buyer if the property is located in a special flood hazard area, dam failure inundation area, earthquake fault zone, seismic hazard zone, high fire severity area or a wildland fire area.  The disclosure requirements apply to all real estate transactions including residential re-sales and commercial property transactions.  Failure to make the required disclosure may result in the seller or the seller's agent being held responsible for any damages suffered by the buyer.

 The seller is required to notify the buyer that the property is in a hazard area if the local jurisdiction and governmental office have been notified that the property is located in one of the six hazard zones or if the seller or seller's agent has knowledge that the property is in a hazard zone. 

 There are a few ways to determine whether property is within a hazard area.  Private companies will perform the necessary research and prepare a report summarizing their findings for a nominal fee.  If one chooses to rely on a private company's report and the report contains any errors, it is important to note that the seller or seller's agent ultimately remains responsible for the errors.  If one wishes to perform the research oneself, the best sources of the necessary information are federal, state and local government agencies.  Sellers and their agents are not responsible for errors or omissions in the disclosure statement if (1) the information is received from a public agency or qualified expert; (2) the seller or its agent did not have personal knowledge of the error or omission; and (3) the seller or its agent exercised ordinary care in disclosing the required information.

 Agencies that may have the needed information are the Federal Emergency Management Agency (FEMA), the California State Office of Emergency Services (OES), the State Board of Forestry, and the California Division of Mines and Geology.  Since the disclosure requirement is relatively new and most of the state and federal agencies are still in the process of determining where the hazard areas begin and end, it may not be possible to determine whether the property in question is within a hazard area.  In this case, the seller or seller's agent must assume that the property is in a hazard area and notify the buyer accordingly.

 In most instances, the primary responsibility for disclosure falls on the seller's agent.  The agent is responsible for making the disclosure if the property is located in an earthquake fault zone, seismic hazard zone, special flood hazard area and dam failure inundation area.  If the seller is not represented by an agent, then the seller is responsible for making the disclosure for the hazard areas listed above.  If the property is located in a high fire severity zone or a wildland fire area, then the seller and not its agent is ultimately responsible for making the disclosure.  If the property is in one of the six hazard areas, it is best to disclose this information to the buyer in writing.  California Civil Code Section 1102.6 lists all the information which must be disclosed to comply with the law.

 The potential liability for not making the necessary disclosure is substantial.  While the transaction cannot be rescinded for failure to disclose, any person who willfully or negligently fails to make the required disclosure is responsible for all of the damages suffered by the buyer.  If the property were to be damaged by fire, flood or earthquake, the victims would be able to recover damages from the seller as a result of the non-disclosure.

The result of the new legislation is that sellers now have one additional requirement to satisfy when selling property.  To ensure that the seller relieves itself of all possible liability in connection with the sale of property, a seller must investigate the property sufficiently and disclose everything known about the property to the buyer.

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