Hurricane Harvey Underscores Flooding Definitions in Real Estate
Hurricanes Harvey and Irma have devastated property in the coastal regions of our country, especially in Texas and Florida. For insurance purposes, it may be necessary to determine whether damage to a particular property is a result of “windstorm” or “flooding,” which generally depends on how those terms are defined in the insurance policy. However, there is another purpose for which a property owner in Texas may need to determine what constitutes “flooding”—the seller’s disclosure notice required by the Texas Property Code.
Specifically, Section 5.008 of the Texas Property Code requires a seller of residential real property comprising not more than one dwelling unit, i.e. a single-family home, to give the purchaser of the property a written notice which contains, at a minimum, the items prescribed by that section. In relation to flooding, Section 5.008 requires a seller answer “Yes (Y)” or “No (N)” by writing in a space provided on a checklist if the seller is aware of the following conditions:
• Previous Flooding
• Improper Drainage
• Water Penetration
• Located in 100-Year Floodplain
• Present Flood Insurance Coverage
Additionally, if the seller answers “Yes (Y)” to any of the above, Section 5.008 requires the seller to provide an explanation.
As authorized by Section 5.008, some brokerage organizations, including the Texas Real Estate Commission (TREC) and the Texas Association of Realtors (TAR), promulgate forms for the required notice, which must read “substantially similar” to the form set out in Section 5.008. Some such forms may break the items required by Section 5.008 into subcategories or even require disclosure of additional information not specifically required by Section 5.008. For example, a form may break “previous flooding” into “previous flooding onto the property” and “previous flooding into the structures.” Most organizations that promulgate such standardized forms represent both buyers and sellers, which may explain why the standardized form used by such organizations may require more information than is required by Section 5.008.
Obviously, any buyer would favor receiving more than the minimum notice required; and, depending on the circumstances, a given seller may favor providing additional, gratuitous information if it adds value to the property. However, if the additional information is not favorable, the seller may be volunteering information that negatively affects the value of their property. Therefore, if a seller is aware of previous flooding, improper drainage, water penetration, that the property is located in a 100-Year Floodplain, or of present flood insurance coverage, then the seller may not want to use a disclosure form that requires the seller to report more than just these minimum flood related items.
However, while a seller may not technically be required to disclose more than the minimum prescribed by Section 5.008, a buyer may insist upon receiving more than the minimum disclosures, and may walk away from the sale if the seller refused to provide the requested additional information.
Whether Hurricane Harvey will cause a shift in the standardized forms used for seller’s disclosures is unknown; but, it is unfortunately certain that, after Harvey, many more property owners in Texas will have to answer “Yes (Y)” in response to one or more of the flood related disclosures required by Section 5.008 of the Texas Property Code. I hope you are not among those for whom Harvey has effected such a change.
Please do not rely on this article as legal advice. We can tell you what the law is, but until we know the facts of your given situation, we cannot provide legal guidance. This website is for informational purposes and not for the purposes of providing legal advice. Information about our real estate practice can be found here.