(908)402-4770Recently, New Jersey enacted a new law aimed at enhancing transparency and awareness regarding flood risks for both commercial and residential properties. The New Jersey Flood Risk Notification Law became effective on March 20, 2024. It requires property owners and landlords to disclose information related to flood hazards to potential buyers or renters before completing a real estate transaction.
The complete text of the new law can be read here.
With the passage of the law, New Jersey became the 30th state in the nation to require landlords and sellers of commercial and residential property to disclose knowledge of a property’s history of flooding, flood risk, and location in a flood zone or area to prospective tenants and purchasers.
Additionally, the new law requires every residential lease to contain a notice to tenants that flood insurance may be available to renters through the Federal Emergency Management Agency (FEMA) National Flood Insurance Program.
Under the new law, property owners and landlords must provide written disclosure to buyers or renters regarding any previous flood events that have affected the property. The disclosure must include information about flood insurance coverage and any measures taken to mitigate flood risks.
Implications for Real Estate Transactions
For real estate transactions involving properties in flood-prone areas, the new disclosure requirements may affect the due diligence process. Buyers and renters may request additional information or assessments to evaluate the property’s susceptibility to flooding and assess potential risks.
In what has been touted as one of the nation’s strongest flood risk disclosure laws, if a landlord violates the disclosure requirements and a tenant subsequently discovers that the leased premises are in a FEMA Special or Moderate Risk Flood Hazard Area, the tenant may immediately end their lease without penalty. Furthermore, within 30 days after the tenant surrenders possession of the leased premises to the landlord, the tenant is entitled to a refund of all rent or other amounts paid in advance under the lease.
If a landlord violates the disclosure requirements and flooding occurs that results in damage to a tenant’s personal property, affects the habitability of the leased premises, or affects the tenant’s access to the leased premises, the tenant may pursue all legal remedies under the law to recover damages recognizing the landlord’s failure to disclose critical information.
Landlord Disclosure Requirements
The Flood Risk Notification Law supplements and amends the existing statutory disclosure requirements in N.J.S.A. 46:8-50. Landlords who rent or lease, for a term of at least one month, commercial space or residential dwelling units in premises containing over two dwelling units (or over three dwelling units where one unit is owner-occupied) must notify each tenant in writing prior to a lease signing or renewal, (a) whether a property is in a FEMA Special Flood Hazard Area (100-year floodplain) or Moderate Risk Flood Hazard Area (500-year floodplain).
Additionally, the landlord must disclose (paragraph b) whether the landlord has actual knowledge that the rental premises or any portion of the parking areas of the real property containing the rental premises have been subject to flooding.
If the lease is in writing, the landlord may include the required notice in the written lease, provided that, with a residential lease, the notice must be in a separate rider, written in no less than 12-point typeface, and individually signed or otherwise acknowledged by the tenant.
The New Jersey Department of Community Affairs (DCA), in consultation with the New Jersey Department of Environmental Protection (DEP), will develop and publish a model notice on its website and in the New Jersey Register. Landlords will use this notice which will include additional notifications of statewide flood risks and links to the DEP website.
Although the act takes effect immediately, the landlord disclosure requirements only apply to the signing or renewal of leases of rental property occurring on or after the 90th day next following the publication of the model notice by DCA.
DEP is required to provide on its website information that helps property owners provide the required disclosures, including a tool searchable by mailing address to identify if the property is in a FEMA Special or Moderate Risk Flood Hazard Area. The requirement to disclose if the property is in the FEMA Special or Moderate Risk Flood Hazard Area, beyond actual knowledge, takes effect after the website look-up tool is in place. Until that time, a landlord should disclose such information to its actual knowledge.
Every residential lease must also contain the following notice to tenants:
Flood insurance may be available to renters through FEMA’s National Flood Insurance Program to cover your personal property and contents in the event of a flood. A standard renter’s insurance policy rarely covers flood damage. Review your policy to determine if you have coverage.
Seller Disclosure Requirements
The Flood Risk Notification Law mandates that sellers of real property in New Jersey must disclose whether the property is in a FEMA Special or Moderate Risk Flood Hazard Area, as well as any pertinent knowledge regarding flood risks associated with the property. This obligation mirrors the requirements imposed on landlords when leasing property.
The DCA, in collaboration with the DEP, amends the regulations governing property condition disclosure statements to align with the Flood Risk Notification Law. Preceding this regulatory update, the DCA must provide access to the revised form by publishing it on the DCA’s website. Sellers are then required to use this revised form for all property sales or exchanges occurring 90 days after its publication on the DCA’s website.
New Jersey’s Flood Risk Disclosure Law
The attorneys at Schiller, Pittenger & Galvin, P.C., specialize in commercial and residential real estate transactions in New Jersey. If you are selling, buying, leasing out, or renting a commercial or residential property in New Jersey, we can help. You can call us in our Scotch Plains office at 908 402 4770 to schedule a conference. You can also email us to set up a meeting.