Introduction
Flood risks in New Jersey are growing due to the effects of climate change. Coastal and inland areas may experience significant flooding now and in the near future, including in places that were not previously known to flood.
What You Need to Know:
- On July 3, 2023, New Jersey passed the Flood Disclosure Law, which, effective as of March 20, 2024, requires all sellers and landlords of real property in New Jersey, including commercial and industrial properties, to disclose specific information regarding a property’s flood risk.
- Non-adherence to the Flood Disclosure Law has serious financial consequences and could allow a buyer or tenant to promptly terminate a lease without incurring any penalties and recoup certain costs.
In an effort to increase awareness around these flooding issues, Governor Phil Murphy enacted the Flood Risk Notification Law on July 3, 2023, effective as of March 20, 2024, and codified as N.J.S.A. 56:8-19.2 with respect to requirements on sellers of real property, and N.J.S.A. 46:8-50 with respect to requirements on landlords of real property (collectively, “Flood Disclosure Law”). The Flood Disclosure Law broadened the responsibilities of New Jersey property owners to notify buyers and tenants about flood risks associated with all real property, not just residential real property. As a result, all owners and landlords of commercial properties are now required to comply with the Flood Disclosure Law.
Beginning March 20, 2024, all sellers of New Jersey real property are required to provide a Property Condition Disclosure Statement (“Disclosure Statement”) to a purchaser. The Disclosure Statement must include disclosures of knowledge pertaining to a property’s flood history, risk of flood, and whether the property is located in a FEMA Special or Moderate Risk Flood Hazard Area. The Disclosure Statement is provided by the New Jersey Division of Consumer Affairs, and the related flood disclosures now appear as questions 109-117.
Previously, the Disclosure Statement was only required for residential sales. The Flood Disclosure Law now requires all sellers of commercial and industrial property to disclose any actual knowledge concerning flood risks to the property, before the purchaser becomes obligated under contract for the purchase or lease of the property.
Also beginning March 20, 2024, landlords of real property located in New Jersey must comply with the Flood Disclosure Law and provide tenants with a Flood Risk Notice (“Flood Risk Notice”) that addresses whether the landlord has actual knowledge of flooding at the rental, among other things.
New Obligations and Penalties for Property Sellers and Renters
a. Disclosure Statement & Seller Obligations
The updated Seller’s Disclosure Statement requires all sellers, without distinction between residential, commercial and industrial properties, to divulge whether any part of the property falls within either (1) FEMA’s designated Special Flood Hazard Area or “100-year floodplain,”; or (2) FEMA’s designated Moderate Risk Flood Hazard Area or “500-year floodplain.” Sellers must also disclose federal mandates regarding flood insurance, any and all past FEMA or federal disaster flood assistance, current flood insurance coverage, availability of FEMA elevation certificates, history of flood damage claims, and instances of flood-related damage or water seepage. The New Jersey Department of Environmental Protection currently provides a free Flood Risk Notification Tool that enables users to enter the parcel information for a property to receive a Flood Risk Notification email, describing where the property falls within FEMA’s designated Special or Moderate Risk Flood Hazard Area.[1]
b. Seller Penalties for Non-Compliance
Should a seller breach the Flood Risk Notification Law, the Consumer Fraud Act carries significant penalties. For a first offense, a violator may face fines of up to $10,000, escalating to $20,000 for subsequent violations. Further, if the violation causes financial harm and the violator knowingly targets a senior citizen or a person with a disability, an additional penalty of up to $10,000 may be imposed. In cases where a violation is part of a deliberate scheme aimed at exploiting senior citizens or persons with disabilities, the penalty can rise to $30,000.
Moreover, violators may be compelled to restore affected purchasers for any money or property acquired through the violation, with an additional requirement to pay double the amount obtained from a senior citizen due to the violation.
A consumer injured by a violation of the Consumer Fraud Act has the right to pursue civil claims against violators, that may result in the injured consumer obtaining equitable relief, treble damages, and/or reasonable attorneys’ fees and costs.
c. Flood Risk Notice & Landlord Obligations
The updated Flood Disclosure Law requires landlords of real property located in New Jersey to provide tenants with a Flood Risk Notice that discloses any flood risks based on a landlord’s actual knowledge of the rental premises or any portion of the parking areas of the rental premises, the availability of insurance for tenants through FEMA’s National Flood Insurance Program, and the impact of climate change on New Jersey’s flood risks.
Landlords must provide the notice to tenants prior to signing a new lease or a lease renewal. The Flood Risk Notice must be provided in writing as part of a lease or lease renewal and for residential leases, the written notice must appear as a separate rider, written in font no less than 12-point typeface, and must be signed or acknowledged by the tenant. Seasonal rentals of less than 120 days are exempt from these disclosure requirements.
d. Landlord Penalties for Non-Compliance
Should a landlord fail to adhere to the Flood Disclosure Law and the tenant subsequently discovers that the leased property falls within a FEMA Special or Moderate Risk Flood Hazard Area, the tenant may immediately terminate the lease without incurring any penalties by giving a written notice of termination to the landlord. Furthermore, within 30 days of surrendering the rental premises, the tenant is entitled to a full refund of all prepaid rent and associated expenses covering any period following the lease’s commencement.
In the event that the landlord’s non-compliance results in flooding that damages the tenant’s personal belongings or impacts the habitability or accessibility of the rental premises, the tenant retains the right to pursue all available legal remedies to recover damages stemming from the landlord’s failure to disclose flood-related information.
Additionally, landlords may face fines of up to $100 for each violation of the Truth-in-Renting Act.
Conclusion
New Jersey now requires detailed flood risk disclosures when selling and renting all forms of real property. The Flood Disclosure Law aims to protect prospective buyers and tenants from unforeseen damages and financial losses in the midst of growing climate change-based challenges. This requirement directly implicates commercial property owners and landlords in a duty to disclose. Non-adherence to the Flood Disclosure Law carries serious financial consequences for commercial sellers and landlords.
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NOTE: This alert was written with contributions from Summer Associate, Anthony Essick.
