New Florida HOA Flood Disclosure Law: A Comparison with Texas

Chris Greene here with The Flood Insurance Guru, here to talk about some important changes happening in the world of flood insurance and property buying. Today, we’re diving into Florida’s new flood disclosure law, comparing it with Texas’ 2020 law, and discussing what this means for homebuyers across the country. Let’s get started!

Florida’s New Flooding Disclosure Law

On May 30, 2024, Governor Ron DeSantis signed House Bill 1049 requiring Homeowners Associations (HOAs) in Florida to disclose any known flooding risks to prospective homebuyers. This is a big deal because flooding is a major concern in Florida, and having this information upfront can save you a lot of headaches down the road.

This will come in a new form that is required to be titled “Flood Disclosure” and must be part of disclosure in the sale of real property. The flood disclosure form also requires a disclaimer to be included which states:

“Flood Insurance: Homeowners’ insurance policies do not include coverage for damage resulting from floods. Buyer is encouraged to discuss the need to purchase separate flood insurance coverage with Buyer’s insurance agent.”

If you’re selling a home in Florida, keep in mind that you’ll be required as a seller to disclose flood claims as well. This includes claims from both the National Flood Insurance Program (NFIP) policy claims and private flood insurance policy claims.

This also means that sellers must disclose whether or not they received any federal assistance for flood damage which includes, but is not limited to the ones provided by the Federal Emergency Management Agency (FEMA).

Key reminders to this new addition Florida Law for disclosure to Florida homes and real estate.

1. Mandatory Disclosure: HOAs must inform buyers of any known flooding risks or history of flooding incidents within the community. The law requires this disclosure to be part of the residential real estate transaction.
2. Inclusion in Real Estate Transactions: These mandatory flood disclosures are now a part of the property sale process, ensuring buyers are fully informed before making a purchase and/or as the sale contract is executed.
3. Penalties for Non-Compliance: HOAs that fail to provide accurate flooding information can face legal consequences and fines.

This legislation, championed by Representative Christine Hunschofsky, is a step forward in protecting homeowners from unforeseen flood risks.

So how does this compare to the disclosure law that happened in 2020 for Texas?

Texas’ 2020 Flood Disclosure Law

Let’s rewind to January 1, 2020. Texas rolled out a law requiring sellers to disclose detailed flood history and risks associated with their properties. This law came about after Hurricane Harvey, which caused massive flooding and highlighted the need for better flood risk awareness.

Key Points of Texas’ Law:

1. Seller’s Disclosure Notice: Sellers must complete a detailed disclosure notice, highlighting any flood damage, flood insurance claims, and the property’s floodplain status.
2. Expanded Definition of Flooding: The law covers both historical and potential future flood risks.
3. Buyer Awareness: Ensures buyers are aware of potential flood hazards, helping them make informed decisions and consider the cost of flood insurance.

You can listen to our podcast on this Texas Disclosure Law below:

Comparative Analysis

While both Florida and Texas aim to increase transparency and protect homebuyers, there are some key differences in their approaches:

Scope of Disclosure:

• Florida: The new law targets HOAs, requiring them to disclose flooding risks related to the community.
• Texas: The 2020 law places the responsibility on individual sellers to disclose detailed flood history and risks associated with their specific property.

This difference in scope puts the accountability and responsibility of HOAs in Florida to help in informing a flood risk of a property. On the other hand, Texas puts this same responsibility on each individual selling a home.

Enforcement and Compliance:

• Florida: HOAs face legal consequences and fines for non-compliance, incentivizing accurate and timely disclosures.
• Texas: Sellers face legal repercussions for failing to provide accurate flood information, ensuring individual accountability.

Impact on Buyers of Real Estate

• Florida: Buyers gain insight into community-wide flooding issues, which can affect overall property values and insurance requirements. This can also potentially help Florida’s flood mitigation efforts which will be taken into out with the Community Rating System (CRS) with FEMA and the NFIP.
• Texas: Buyers receive detailed information about individual property risks, allowing them to assess potential insurance costs and flood mitigation measures.

Coastal Flood-Prone States Without Disclosure Laws

Now, let’s talk about some coastal states that still don’t have comprehensive flooding disclosure laws. This lack of regulation can leave homebuyers uninformed and unprepared for potential flooding hazards.

Examples of States WITHOUT Flood Disclosure Laws:

1. Alabama: Despite its extensive Gulf Coast shoreline, Alabama does not have a mandatory flood risk disclosure law for property sales.
2. Mississippi: Similar to Alabama, Mississippi lacks legislation requiring sellers or HOAs to disclose flooding risks to potential buyers.
3. Georgia: While Georgia has flood-prone coastal areas, there is no statewide requirement for flood risk disclosures during property transactions.
4. South Carolina: Although vulnerable to hurricanes and coastal flooding, South Carolina does not mandate flooding risk disclosures for home sales.

The Impact of No Disclosure Laws on Home Buyers

So, what does this mean for homebuyers in these states? Let’s break it down:

Uninformed Buyers

This presents hidden risks as without required disclosures, purchasers may unknowingly buy properties in flood-prone areas. This lack of awareness can lead to significant financial burdens from unexpected flood damage.

This can also lead to buyers facing difficulties securing affordable flood insurance or may be unaware of the necessity for such coverage, leading to potential gaps in protection which can be financially devastating once the property experiences a flood.

Increased Risk

Homeowners who are unaware of flood risks are less likely to take necessary precautions or invest in flood mitigation measures. This increases the potential for severe damage during flood events. With the concern of flood insurance, this can mean that homeowners won’t have the comprehensive coverage to bounce back from flood loss.

Additionally, communities without transparent flood risk information are at higher risk, as collective efforts for flood mitigation and preparedness may be insufficient. Did you know that this can also hurt the cost of flood insurance in that community? Yes, it can! Especially with the National Flood Insurance Program (NFIP) which rewards community efforts on flood mitigation through discounts on flood policies with its Community Rating System (CRS).

Market Impact

Property Values: The absence of transparency can affect property values and market stability. Buyers may become wary of investing in areas with unknown risks, potentially leading to decreased property demand and value.

Legal and Financial Repercussions: In the absence of disclosure laws, disputes between buyers and sellers regarding flood risk information can lead to legal battles and financial losses.

How These Laws Impact Homebuyers Nationwide

When we talk about flood disclosure laws, it’s important to understand their broader implications. These laws can significantly influence the home-buying process, insurance costs, and overall market dynamics across the country.

Enhanced Buyer Awareness

• Informed Decisions: Flood disclosure laws empower buyers with crucial information about potential risks. This helps them make informed decisions, whether it’s about purchasing a property, negotiating the price, or planning for flood insurance.
• Safety and Preparedness: Knowing the flood risks allows buyers to take proactive steps to protect their properties. This might include investing in flood barriers, elevating structures, or purchasing adequate insurance coverage.

Financial Protection

• Insurance Costs: With a clear understanding of a property’s flood risks, buyers can better assess the cost of flood insurance. This prevents unpleasant surprises post-purchase and ensures they are adequately covered.
• Property Value: Transparent flood risk information helps maintain property values. Buyers are more confident investing in properties where they understand the risks and protections in place.

Community Resilience:

• Collective Preparedness: When communities are aware of flood risks, they can collectively invest in mitigation measures. This might include improving drainage systems, building levees, or implementing community-wide flood plans.
• Stronger Regulations: States with robust flood disclosure laws set a precedent for others. As more states adopt similar regulations, we move towards a more resilient and informed national housing market.

The Role of Real Estate Professionals

Real estate professionals play a crucial role in this landscape. They are the bridge between buyers, sellers, and regulatory information.

Through educating clients, real estate pros can help inform buyers about the importance of flood risk information, helping them understand how to interpret disclosures and what questions to ask. For the sellers, agents can guide sellers through the disclosure process, ensuring they provide accurate and complete information, thereby avoiding legal issues and building trust with buyers.

Additionally, real estate professionals can be a great help and influence for transparency as they can advocate for stronger flood disclosure laws in their states. This action can have a big contribution to safer and more transparent property markets. By engaging with local communities, agents can promote awareness of flood risks and encourage collective preparedness efforts.

Real-Life Example

Recently, a homeowner in Tampa, unfortunately, had to go through an unpleasant ordeal when it comes to disclosing flood damage on their home. To summarize, the homeowner’s claim was denied by FEMA on their flood insurance due to prior loss. This meant that the homeowners had to spend thousands of dollars for the repairs on their homes.

With this new disclosure law, buyers and potential homeowners will be able to receive the information they need on a property’s flood risk and history as it will be asking specific questions about flood loss on a property helping buyers understand the real risk for flood insurance.

You can watch a video covering this story from WFLA News Channel below:

Conclusion

Florida’s new HOA flooding disclosure law is a significant step toward protecting homeowners and enhancing transparency in real estate transactions. By comparing it with Texas’ 2020 law, we can see that while the approaches differ, the ultimate goal remains the same: to provide prospective buyers with essential information about flooding risks.

However, the lack of similar laws in other coastal states highlights a critical gap in protecting homebuyers and ensuring informed decisions.

For homeowners and real estate professionals in flood-prone areas, understanding these laws is crucial. Whether you’re in Florida, Texas, or another state considering similar legislation, staying informed about flooding risks and disclosure requirements can help you make better decisions and protect your investments.

As always, The Flood Insurance Guru is here to help you navigate these changes and ensure you’re fully prepared for any flooding challenges. If you have questions or need assistance with flood insurance or flood zone changes, don’t hesitate to reach out.

Remember, the key to navigating flood risks is staying informed and prepared. So, keep learning, stay proactive, and let us help you secure a safer future for your home and family.