By JCP Geologists

On June 1, 1998, the disclosure requirements of AB 1195 went into effect thus changing the face of natural hazard disclosure throughout California. What does the law do? Simply put, AB 1195 (now known as California Civil Code 1103) mandates three natural hazard disclosures and consolidates these and previously required disclosures onto a statutory form called the Natural Hazard Disclosure Statement (NHDS). This form is now a legally required part of most residential property transactions.

JCP Reports have been designed to meet these requirements.

The law applies to non-residential and "exempt" properties as well.

Three Mandated Disclosures Added in 1998 as a Requirement of AB 1195

AB 1195 mandated three additional disclosures for the seller and/or seller's agent. Sellers are required to disclose if their property is in a Very High Fire Hazard Severity Zone. Originating as a response to the 1991 Oakland Hills firestorm, these Zones contain a high fire risk due to topography, brush coverage, climate, etc. Properties located in a Very High Fire Hazard Severity Zone are subject to certain fire prevention property maintenance requirements.

Another disclosure requirement of listing agents under AB 1195 is disclosing if a property is within an area of potential flooding due to dam failure. These zones are delineated on Dam Inundation maps adopted by the California Office of Emergency Services (OES).

The Federal Emergency Management Agency issues maps through the National Flood Insurance Program (NFIP) defining flood hazard areas. If a property lies within a 100-year Special Flood Hazard Area (Zone "A" or "V"), federally connected lenders are required to make sure buyers maintain flood insurance on the structure. AB 1195 mandates that the seller's agent also disclose if a property is located in a Special Flood Area (any Zone "A" or "V").

Disclosure Forms and Procedures

AB 1195 also changed the way agents provide natural hazard disclosure information by creating a statutory form called the Natural Hazards Disclosure Statement (NHDS). The NHDS consolidates the newly mandated disclosures discussed above with the existing required disclosures of State Responsibility Areas, Earthquake Fault Zones and Seismic Hazard Mapping Act Zones. The new form lists each natural hazard disclosure and requires that the seller and their agent determine if a zone affects the property from their own "actual knowledge" or by reading the appropriate map. They must then mark either "yes" or "no" to indicate if the property is located within each of the zones. In a significant change to current disclosure practice, the seller and their agent sign the NHDS to "represent that the information herein is true and correct" in order to complete the form.

In the case of Special Flood Hazard Areas and Areas of Potential Flooding due to dam failure, there is a space provided on the NHDS for "Don't know/Information not available from local jurisdiction" in addition to the yes and no spaces. This choice is provided because these particular disclosures are triggered by either:

• "Actual knowledge" of the seller or their agent
• The local jurisdiction has compiled a list, by parcel, of properties in the zones

It is unclear when localities will compile such itemized parcel lists. However, maps are currently available delineating both dam inundation zones and the NFIP flood zones. Prudent business practice suggests providing natural hazard disclosure information from the currently available map sources whenever possible to avoid potential liability exposure.

Decreased Liability

The NHDS requires that the seller's agent and the seller sign the form. Requiring these signatures can increase liability exposure for both agents and sellers. Importantly, however, AB 1195 includes a provision that protects the agent and seller from liability exposure for the disclosures. In outlining the procedures for completing the NHDS, AB 1195 references §1102.4(a) of the California Civil Code. The section of the law states that neither the transferor nor any listing or selling agent shall be liable for any error, inaccuracy, or omission of any information delivered in a report prepared pursuant to §1102.4(c):

"The delivery of a report or opinion prepared by a licensed engineer, land surveyor, geologist....or other expert, dealing with matters within the scope of the professional's license"

By referring agents to professional reports prepared pursuant to Civil Code 1102.4, the new law allows agents to avoid liability for the disclosure.

What does this mean to agents? It means that by using a report signed by a licensed professional, the broker, agent and the seller are legally shielded from the liability exposure the disclosures present.

AB 1195 changed the way that real estate professionals do business. It added new disclosures requirements, consolidated existing requirements and created a statutory form and practice for natural hazard disclosures. Many brokers and agents may be concerned that these disclosures can only complicate a transaction. However, the law has some serious benefits for real estate professionals. AB 1195 sets clear standards and creates a single guideline for natural hazard disclosures, making it easier to understand what is required. AB 1195 also provides one clear form for buyers, which may actually cut down on paperwork. Most importantly though, AB 1195 gives the Realtor what they want most, a clear and simple way to fulfill disclosure requirements without increasing liability exposure by using a report signed by an appropriately licensed professional such as a geologist.