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For the prior video feature in this series introducing the function of the Natural Hazard Disclosure (NHD) Statement, click here.

Use of a natural hazard expert to limit liability

Natural hazard information is obtained from the public records. If not retrieved by someone, the seller and seller’s agent cannot make their required disclosures to prospective buyers.

To obtain the natural hazard information, the seller and the seller’s agent are required to exercise ordinary care in gathering the information. They may gather the information themselves or the seller may employ an NHD expert to gather the information. When an expert is employed, the expert prepares the NHD form for the seller and the seller’s agent to review, add any comments, sign and have ready for delivery to prospective buyers. [Calif. Civil Code §1103.4(a)]

Thus, the seller and seller’s agent may obtain natural hazard information:

  • directly from the public records themselves; or
  • by employing a natural hazard expert, such as a geologist.

For the seller and the seller’s agent to rely on an NHD report prepared by others, the seller’s agent need only:

  • request an NHD report from a reliable expert in natural hazards, such as an engineer or a geologist who has studied the public records;
  • review the NHD form prepared by the expert and enter any actual knowledge the seller or seller’s agent may possess; and
  • sign the NHD Statement provided by the NHD expert and deliver it with the NHD report to prospective buyers or buyer’s agents. [CC §1103.2(f)(2)]

When prepared by an NHD expert, the NHD report needs to also note whether the listed property is located within two miles of an existing or proposed airport, an environmental hazard zone called an airport influence area or airport referral area.

The buyer’s occupancy of property within the influence of an airport facility may be affected by noise and restrictions, now and later, imposed on the buyer’s use as set by the airport’s land-use commission. [CC §1103.4(c)]

Also, the expert’s report is to note whether the property is located within the jurisdiction of the San Francisco Bay Conservation and Development Commission.

Natural hazard experts as the best practice

The Natural Hazard Disclosure scheme encourages brokers and their agents to use natural hazard experts to gather and report the information available to all from the local planning department rather than do it themselves. The use of an expert to gather information from the public record and prepare the report relieves the seller’s agent of any liability for errors not known to the agent to exist.

While an agent is not mandated to use of an expert, the practice is prudent as a risk mitigation step undertaken to manage liability on sales listings. The other NHD risk for seller’s agents is eliminated by the timely delivery of the NHD to prospective buyers before going under contract.

Neither the seller nor any agent, whether the seller’s or the buyer’s agent, is liable for the erroneous preparation of an NHD Statement they have delivered to the buyer, if:

  • the NHD report and form is prepared by an expert in natural hazards, consistent with professional licensing and expertise; and
  • the seller and seller’s agent used ordinary care in selecting the expert and in their review of the expert’s report for any errors, inaccuracies and omissions of which they have actual knowledge. [CC §§1103.4(a), 1103.4(b)]

Caution:  The seller’s agent’s dilatory delivery of an expert’s NHD to the buyer or the buyer’s agent, after the offer has been accepted, will not protect the broker from liability for the buyer’s lost property value due to the nondisclosure before acceptance. If the agent knew or ought to have known of a natural hazard noted in the readily available planning department’s parcel list, the agent is exposed to liability.