The Texas Legislatures passed two bills requiring a new Seller’s Disclosure Notice for all residential home sales occurring after September 1, 2019. Specifically, this new form requires more extensive disclosures by sellers when their homes have undergone any type of flood damage or flood insurance claims. This move came at the tail end of the what some are considering the highest year-long period of rainfall our state has ever seen.
A Seller’s Disclosure form is compiled by the Texas Real Estate Commission (TREC) and used in almost all sales of residential property. The purpose of the Disclosure is to inform the new buyers of any known defects, problems, or issues with the residence. Much litigation ensues over these disclosures because buyers will purchase the home and find problems with it shortly after moving in. From plumbing to foundation, and roofing to flooding, buyers often find out they have purchased a house that has a major problem and lawsuits ensue. The Disclosure form is worded in such a way that the sellers must only disclose if they know of any defects. For example, instead of asking “is the foundation in good condition?”, the Disclosure prompts the seller with “Are you aware of any defects or malfunctions in any of the following?” What follows is a series of check boxes where the seller is obligated to disclose any known defects.
When buyers discover these undisclosed defects, they typically file suit under the Texas Deceptive Trade Practices Act (DTPA) claiming that the seller willfully withheld information about the defect or malfunction when filling out the Disclosure. Usually the buyers cite cracks that the sellers should have known indicated foundation problems, or how routine use of the bathrooms lead to a catastrophic failure of plumbing. The kicker with claims under the DTPA is if the buyer can prove the seller actually knew of the defect and purposefully withheld the information, the buyer can receive up to three times his/her total out of pocket damages for the repairs plus attorneys’ fees incurred pursuing the claim. As more buyers file these claims, Texas Courts consistently uphold the principle that unless the Seller actually knows of these defects and actually lies on the Disclosure, the buyer does not have a valid DTPA claim.
So why does this flood language change matter? The Disclosure change deletes a handful of general questions about flooding listed in the same chart as other possible defects (e.g. lead paint, asbestos, radon gas). Sellers reviewing this chart are more likely to go into auto pilot and just check the “no” box as they move through the different options. The new Disclosure sets out Section 5 as an entire portion devoted to detailed questions about flood insurance, previous flooding, previous water penetration into the residence, and whether the residence is located in a floodplain. Additionally, in newly promulgated Sections 6 and 7, the Disclosure seeks information about previous flood insurance claims or help from FEMA or the SBA for flood damage. What the Legislature is inherently saying is with the onslaught of rainfall and subsequent flooding in Texas, a simple checkbox is insufficient to adequately protect new home buyers. Now, sellers will have to be more thorough when moving through these Disclosures as they pertain to flooding – or else they will expose themselves to possible damages in a DTPA suit.
The Pennington Firm handles many residential real estate disputes – especially those related to Disclosures. Please reach out to us if you have any questions before filling out a Disclosure or if you run into any problems with your Disclosure after a home sale.
