Title Insurance and Closing Services for Residential REALTORS®

Sec. 1103

What You Need to Know About Sec. 1103 of the California Civil Code

On June 1, 1998, a new California disclosure law went into effect. The law, Sec. 1103 California Civil Code, mandates three new map-based natural hazard disclosures and consolidates both new and existing required disclosures onto a new statutory form called the Natural Hazard Disclosure Statement (NHDS).

The new statutory form includes six different required disclosure zones: Special Flood Hazard Areas, Dam Inundation Zones, Very High Fire Hazard Severity Zones, Wildland Fire Hazard Areas, Earthquake Fault Zones and Seismic Hazard Zones. It is now a legally required part of most residential property transactions. 

A) Three New Mandated Disclosures

Sec. 1103 mandates three new disclosures for the seller and/or seller's agent. Sellers are now 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 new disclosure requirement of listing agents under Sec. 1103 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. Sec. 1103 mandates that the seller's agents also disclose if a property is located in a Special Flood Area (any Zone "A" or "V").

B) New Disclosure Forms and Procedures

Sec. 1103 also changes the way agents provide natural hazard disclosure information by creating a statutory form called the Natural Hazard Disclosure Statement (NHDS). The NHDS consolidates the newly mandated disclosures 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 his 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 his 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. The possibility of not knowing when a jurisdiction has compiled the required lists could expose agents to liability by not knowing when the disclosures are "legally" triggered. However, maps are currently available delineating both dam inundation zones and the NFIP flood zones. Last, but certainly not least, if legally challenged, it could be difficult to prove whether or not the agent or seller had "actual knowledge" whether or not a property was in a certain zone or not. Prudent business practice suggests providing the information from the currently available map sources when possible to avoid potential liability exposure.

C) Decreased Liability

The NHDS requires that the seller's agent and the seller sign the form. Requiring these signatures dramatically increases liability exposure for both agents and sellers. However, Sec. 1103 includes a provision that can protect the agent and seller from liability exposure for the disclosures. In outlining the procedures for completing the NHDS, Sec. 1103 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.

Sec. 1103 changes the way that real estate professionals do business. It adds new disclosures requirements, consolidates existing requirements and creates a statutory form and practice for natural hazard disclosures. Many brokers and agents may be concerned at the prospect of new rules and paperwork or that new disclosures can only complicate a transaction. However, the new law has some serious benefits for real estate professionals. Sec. 1103 sets clear standards and creates a single guideline for natural hazard disclosures, making it easier to understand what is required. Sec. 1103 also provides one clear form for buyers, which may actually cut down on paperwork. Most importantly though, Sec. 1103 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.