Natural Hazard Disclosures (NHDs)
I. Introduction
Beginning March 1, 1998, the sellers of many residential properties must give prospective buyers a "Natural Hazard Disclosure Statement." Repeated floods, fires, and earthquakes, plus the increasing ability to map the areas susceptible to natural disasters, prompted state legislators to mandate sellers to tell buyers more about the condition of the homes they might buy. This article explains this disclosure requirement, tells why the California Legislature passed the law, and reviews the state government's hazard mapping programs.
NOTE: On Saturday, February 28, 1998, Governor Wilson signed a bill delaying the operative date of the legislation discussed in the following article. The date was changed from March 1, 1998, to June 1, 1998. The bill took effect immediately as an urgency statute, and was enacted in order to provide real estate licensees, state agencies, and local public entities with additional time to prepare to comply with the new disclosure requirements.
II. What Is Required?
A. Natural Hazard Disclosure Statement
In addition to the usual Transfer Disclosure Statement required by Civil Code Section 1102.6, a seller (or the seller's agent) must give the prospective buyer a separate "Natural Hazard Disclosure Statement" if the residential property lies within one or more of six statutorily specified areas:
A special flood hazard area designated by the Federal Emergency Management Agency.
An area of potential flooding in the event of a dam failure, designated by the state Office of Emergency Services.
A very high fire hazard severity zone designated by the California Department of Forestry and Fire Protection.
A wildland fire area that may contain substantial forest fire risks and hazards, designated by the State Board of Forestry.
An earthquake fault zone designated by the State Geologist.
A seismic hazard zone designated by the State Geologist.
The disclosure law, set forth in Civil Code Section 1002.6c, prescribes the contents of the Natural Hazard Disclosure Statement, including a checklist. The Statement warns prospective buyers that "these hazards may limit your ability to develop the real property, to obtain insurance, or to receive assistance after a disaster." The Statement also advises buyers and sellers that they "may wish to obtain professional advice regarding those hazards."
For each of the six natural hazard areas, the seller or agent must indicate on the Statement whether or not the property is located in the area by answering "yes" or "no," and then certify that the information is "true and correct to the best of [his or her] knowledge." If the government's maps are not sufficiently accurate or at a sufficient scale so that a reasonable person cannot determine if the property is included in a natural hazard area, then the seller or agent must answer yes" on the form. It is possible to mark "no" on the form if the seller or agent provides a supplemental report from a licensed professional. This report must be prepared pursuant to Civil Code Section 1102.4(c) and verify that the property is not in the hazard zone.
Anticipating litigation, the law states that the disclosure of natural hazards is not to be used by insurance companies, lenders, or public agencies for other purposes. Further, the law's list of six hazards does not limit any other disclosure duties necessary "to avoid fraud, misrepresentation, or deceit." This statement may become important in future years, as explained in Parts IV and V of this article.
B. Alternative Conditions Triggering Disclosure Obligation
The statutory language that requires disclosure for each of the six natural hazards contains important conditions that may (or may not) trigger a disclosure. For special flood hazard areas and areas of potential flooding, disclosure is required if either (1) the seller (or the agent) has "actual knowledge" that the property is in the hazardous area, or (2) the local agency has compiled a list of the affected parcels and posted an informative notice. For very high fire hazard severity zones, earthquake fault zones, seismic hazard zones, and wildland fire areas, disclosure is required if either (1) the seller (or the agent) has "actual knowledge" that the property is in the hazardous area, or (2) county officials have posted notices explaining where the state's maps can be located.
C. Operative Date
Civil Code Section 1102.6c becomes operative on March 1, 1998. It was added by Chapter 7 of the Statutes of the First Extraordinary Session of 1997, introduced as Assembly Bill 6x (Torlakson, 1997). AB 6x also added and amended other code sections, which are discussed in Part IV of this article.
For a legislative history of AB 6x, see Part III(C) of this article.
III. Evolution of Laws Mandating Natural Hazard Disclosures
A. Preexisting Disclosure Obligations
The notion that sellers should tell prospective buyers about the condition of residential property is not new. For a dozen years, state law has required sellers to give buyers highly detailed Transfer Disclosure Statements.9 Even before the 1997 Torlakson bill, state law required sellers to tell buyers if residential property was in an earthquake fault zone, a seismic hazard zone, or in the state responsibility area for wildland fires. Because the Legislature placed these other requirements in the Public Resources Code, where they were not directly linked to the provisions of the Civil Code that required disclosures, many sellers and their agents may have overlooked them. While information about wildland fires, earthquakes, and other seismic hazards is important to prospective buyers, state law did not require disclosure of other existing information about flood dangers and urban fire hazards.
Need and Ability to Make Additional Disclosures Regarding Natural Disasters
Legislators found that successive natural disasters over the last dozen years -- fires in Santa Barbara, Malibu, Laguna Beach, and the Oakland-Berkeley Hills, the Loma Prieta and Northridge Earthquakes, and the floods of 1995 and 1997 -- produced repeated requests for fiscal relief from local officials and cries for disaster assistance from private property owners. Over the same 12 years, federal agencies and state departments have used emerging technology to collect data and produce more accurate maps of areas that are vulnerable to natural disasters. As the volume and accuracy of the information increased, so too did the desire to use the resulting maps. Motivated by fiscal concerns as well as by a desire to anticipate the effects of future, inevitable disasters, the California Legislature enacted Assembly Bill 6x. The legislative history of this legislation is discussed in the next section of this article.
C. A Brief Legislative History of AB 6x and Related Legislation
After extensive flooding in 1995, State Senator Tom Campbell (R-Stanford) authored a bill that would have required expanded notice to prospective buyers. Campbell's unsuccessful SB 8x would have also limited property owners' ability to receive public aid after future natural disasters. That 1995 bill died in the Senate Judiciary Committee.
After the more devastating New Year's floods of 1997, newly-elected State Senator Barbara Lee (D-Oakland) held a special hearing of her Senate Housing and Land Use Committee and again confronted the need for advance land use planning to avoid development in natural hazard areas. After the Senate Committee's hearing, Assembly Member Torlakson (D-Antioch) introduced AB 6x, patterned after the 1995 Campbell bill but without the provision to deny disaster aid to property owners. Assembly Member Torlakson, a freshman legislator and former Contra Costa County Supervisor, chairs the Assembly's Housing and Community Development Committee. With the cooperation of the California Association of Realtors, his measure moved so smoothly through the 1997 special session that no state legislator ever voted against the bill.
D. Role of Disclosures in Four-Part Response to Natural Disasters
AB 6x represents the California Legislature's attempt to complete the state's four-part response to natural disasters:
Mitigation: avoiding development in hazardous areas.
Preparation: organizing contingency plans and supplies.
Response: mobilizing emergency services and equipment.
Recovery: rebuilding public works and private property.
California's state and local governments have developed highly effective programs that prepare for, respond to, and assist in the recovery process after natural disasters. The state government spends millions of taxpayers' dollars training and equipping emergency response teams and then investing in long-term economic recovery efforts. But mitigation measures are the most cost-effective means to reduce the damage caused by natural disasters and, consequently, reduce the public costs of emergency response and long-term recovery.
When based on reliable and accurate information, land use measures can keep residential development out of areas that are subject to natural hazards: floodplains, seismic hazard areas, and areas prone to wildland fires. Some of these measures rely on public officials' police powers. Floodplain zoning, for example, restricts development within areas that are known to flood. Building codes that ban the use of wooden shakes and shingles in fire zones are another example of police power regulations. Other measures, including AB 6x, influence the private real estate market to achieve similar results. Legislators believed that prospective buyers would learn to be wary of residential property in areas labeled as prone to natural hazards. Informed consumer choices and market forces, not direct government regulation, lie behind AB 6x.
IV. The Hazard Mapping Programs
A. Special Flood Hazard Area
The Federal Emergency Management Agency ("FEMA") maps areas subject to flooding, including areas within the 100-year floodplains (Zone "A"). Used by the Natural Flood Insurance Program, FEMA's maps are familiar to residential lenders, insurers, and most Realtors. AB 6x requires sellers to tell prospective buyers if the residential property lies within a special flood hazard area. Agents and owners of other flood-prone property must decide for themselves whether they have a nonstatutory, common law duty to disclose that information.
Copies of FEMA's maps should be readily available from the planning department in the city or county where the property is located. Information about FEMA's floodplain mapping program and the Natural Flood Insurance Program is available on FEMA's Web-site:
www.fema.gov.
B. Areas of Potential Flooding
AB 6x requires sellers to tell prospective buyers if the residential property lies within an area of potential flooding in the event of the failure of a state-regulated dam. Of the 1,200 dams under the state government's regulatory jurisdiction, about 400 are large enough and close enough to development to require "inundation maps." Many of the biggest dams in California, however, are owned by federal agencies and are not subject to state regulation. Agents and owners of property that might be inundated by the failure of a federal dam must decide for themselves whether they have a nonstatutory, common law duty to disclose that information.
The owner of a state-regulated dam must prepare a draft dam failure inundation map, which the state Office of Emergency Services ("OES") then reviews. OES sends the final inundation map to the cities and counties with jurisdiction over the affected territory so that local emergency services officials can prepare evacuation plans. The Office of Emergency Services and the state Department of Water Resources must keep on file copies of the dam inundation maps. A more accessible source for these dam inundation maps should be each county's emergency services agency. AB 6x requires county officials to post notices at the offices of the county recorder, the county assessor, and the county planning agency that explain where the dam inundation maps are available.
C. Very High Fire Hazard Severity Zones
AB 6x requires sellers to tell prospective buyers if the residential property lies within a very high fire hazard severity zone. After the fatally disastrous firestorm in the Oakland-Berkeley Hills in 1991, the Legislature required the California Department of Forestry and Fire Protection (CDF) to identify very high fire hazard severity zones and send the resulting information to the affected cities, counties, and fire districts. Counties must post notices at the offices of the county recorder, the county assessor, and the county planning agency that explain how to find maps showing these zones. Local agencies were required to designate, by ordinance, very high fire hazard severity zones in their jurisdictions following the identification of these areas by the CDF, but were exempt from this requirement if they adopted ordinances before 1993 that were equivalent to, or more restrictive than, the state standards. Agents and owners of property in areas subject to such an exemption from the statewide requirements must decide for themselves whether they have a nonstatutory, common law duty to disclose that information.
D. Wildland Fire Areas
Even before the enactment of AB 6x, state law had already required sellers to tell prospective buyers if the property was located within a wildland area that could contain substantial forest fire risks and hazards. The State Board of Forestry identifies those lands where the California Department of Forestry and Fire Protection has the primary duty for wildland fire prevention suppression. Many people know these lands as "state responsibility areas" or "SRA land." The CDF sends copies of these maps to the affected counties, and county officials must post notices at the offices of the county recorder, the county assessor, and the county planning agency that explain where the maps are available. CDF's 21 regional ranger units can also answer questions about the SRA maps.
E. Earthquake Fault Zones
The requirement that sellers tell prospective buyers if the property is within an earthquake fault zone predates AB 6x. The Alquist-Priolo Earthquake Fault Zoning Act requires the State Geologist to map areas of potential surface rupture along active earthquake faults, including the San Andreas, Calaveras, Hayward, and San Jacinto faults. After review of these draft maps by the State Mining and Geology Board, the State Geologist must send copies of the final maps to the affected cities and counties. County officials must post notices at the office of the county assessor, the county recorder, and the county planning agency that explain where the maps are available.
Seismic Hazard Zones
For several years, state law has required sellers to tell prospective buyers if the property is inside a seismic hazard zone. Under the 1991 Seismic Hazards Mapping Act, the State Geologist maps areas that are subject to strong ground shaking, liquefaction, and earthquake-induced landslides. After review of these draft maps by the State Mining and Geology Board, the State Geologist must send copies of the final maps to the affected cities and counties. County officials must post notices at the office of the county recorder, the county assessor, and the county planning agency that explain where the maps are available. The State Geologist has concentrated on mapping Southern California's seismic hazards, particularly after the Northridge Earthquake. In addition, the state's seismic hazards maps cover San Francisco. Information about which areas have been mapped is available online at
www.consrv.ca.gov/dmg/shezp/schedule.htm.
G. Access to Maps
Buyers, sellers, Realtors, and their legal advisors need quick access to accurate, reliable maps when they use the Natural Hazard Disclosure Statements. The best place to start your search for the six sets of maps described in this article is the county planning agency. Sometimes called the planning department, a community development department, or even a resource protection agency, county planning agencies are the best local repositories of land use information. Of course, one way to find the county planning agency is to look under "County of..." in the Government listings in the front of the local telephone book. For those with on-line capabilities, there is a complete list of county planning agencies' addresses and telephone numbers at
www.ceres.ca.gov/planning/bol/1999/county.html. An increasing number of the county planning departments have their own Web pages and email addresses.
V. Concluding
When house hunting, buyers can use the Natural Hazard Disclosure Statement as a checklist, asking the seller and the seller's agent if the property is located in a hazardous area. Buyers can ask their agents to find out if the city or county has received state and federal maps of hazardous areas, and where the property is on the official maps.
Sellers, agents, and their attorneys will need to consider whether they have a common law duty to disclose other known natural hazards that are not specifically mentioned by the statute. Other hazards may include the flood-prone areas that lie outside of FEMA's Zone "A," areas of inundation located below federally owned dams, and known seismic hazards in areas that the State Geologist has yet to map.