Flood Risk: What does a NJ Home Seller or Landlord Need to Disclose?
Hurricane Ida recently caused spectacular flooding in highly congested areas across northern New Jersey. On September 2, 2021 New Jersey started to dig out from devastating flooding that destroyed commercial and residential areas alike. Many of the areas hit hardest by Ida were not designated as flood zones — in which flood insurance is required and subsidized by federal law — so few businesses and residences affected had insurance covering Ida’s destruction.
Without insurance, the financial losses from lost business, clean-up and repair expenses, and diminished property values, could be devastating. It is timely, therefore, to review the potential claims available to homeowners and business people who recently purchased or leased properties that were then damaged or destroyed by flooding from Hurricane Ida.
Recent Similar Flooding
Although some reports suggested that Ida’s flooding was unprecedented, that wasn’t the case. Many NJ towns experienced similar flooding exactly ten years ago – on Labor Day weekend 2011 as a result of Hurricane Irene. Millburn, New Jersey, for example, experienced nearly identical flooding during Irene when the West Branch of the Rahway River – which normally trickles through Town as a stream – overflowed its banks, rampaged through stores on Millburn Avenue, and flooded many homes in the Town’s South Mountain neighborhood.
Residential Flood Damage
Standard Condition Disclosure Statement
Residential homeowners who experienced flood damage need to go back and review the closing binder that they received as part of the purchase of their home. It is customary for sellers of homes in northern New Jersey’s competitive real estate market to provide buyers with a standard “Seller’s Property Condition Disclosure Statement” itemizing known problems or defects with a home. Item 9 of the Disclosure Statement requires sellers to answer the question “Are you aware of the presence of any water leakage, accumulation, or dampness within the basement or crawl spaces or any other areas within any of the structures of the property.” A copy of the standard Disclosure Statement is available here. If a seller denied having familiarity with water penetration issues, but it now appears likely that the property flooded during Irene just as it did during Ida, the buyer should consider legal action against the seller for fraudulently concealing the condition of the home.
Commercial Flood Damage
Commercial tenants who recently entered an expensive lease of a property that flooded during Ida should similarly consider their legal remedies against their landlords. While New Jersey law is less deferential to claims of fraudulent inducement made by commercial lessees rather than residential purchasers, courts allow commercial tenants to reduce lease payments or exit a lease altogether if a landlord has obviously misrepresented or failed to disclose a severe latent defect. Given the extraordinary damage that some commercial locations experienced in 2011 as a result of Hurricane Irene, and the identical or worse damage caused by Hurricane Ida in 2021 – courts will not be sympathetic to landlords who concealed flood risks faced by their properties when negotiating expensive commercial leases with unknowing tenants.
If your home or business experienced significant flooding from Hurricane Ida, you should investigate to determine if it suffered similar flooding before, particularly ten years ago during Hurricane Irene. If it did, you should consider your legal rights against the seller of your home or the landlord of your business. New Jersey law imposes important obligations on sellers and landlords to disclose to buyers and lessees information about known latent defects such as vulnerability to repetitive flooding.
If your property was damaged by Ida flooding and you would like to discuss your rights, please contact Thomas Chase, Esq. here.