Disclosure Fraud?

an eye looking through a crack

California Civil Code § 1103 et seq. mandates that, with some exception, sellers of residential real property, or when seller is represented by a real estate agent, sellers’ designated agent, disclose natural hazards that materially affect the value or desirability of a property to a prospective buyer. Sellers and their agents are charged with due diligence and good faith regarding the completeness and accuracy of the disclosure information provided. Often this disclosure information is purchased from a Natural Hazard Disclosure Company (NHDC). The duty of a seller and their agent to provide accurate disclosures to a buyer cannot be waived or transferred to another party.

The Problem: The agent chooses the NHDC that is the cheapest or the NHDC that is providing the agent and/or broker with a kickback disregarding the disclosure report’s accuracy or completeness. Buyers often receive inaccurate, incomplete reports from sellers and their agents.

How does this affect the buyer? By receiving inaccurate or incomplete information, the buyer:

  1. May have paid too much for their property due to undisclosed undesirable factors.
  2. May not be able to build on their property.
  3. May not be able to obtain / maintain insurance on the property.
  4. May have unknown tax assessments.
  5. May unknowingly be in high-fire zones and subject to onerous local defensible space and vegetation management ordinances.
  6. May unknowingly be in in liquefaction, subsidence, soils hazard areas, and other seismic zones.
  7. May be subject to other non-disclosed noise, industrial, radon etc. issues.

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