The Murky Waters of Flood Issues

What lies ahead? Disclose, disclose, disclose.
Over the past few years, I have seen new and very interesting developments that even for an experienced associate with many years in this profession, have caused me to sit back and ponder a response.

Starting back in 2007 and 2008 when our market collapsed, agents were constantly having to educate their sellers on “what their property was worth.” The seller’s requests came in different forms, but the meanings were all the same. I bought my house for X dollars and now I need more than that to break even. Fortunately, most everyone has realized that the market dictates what a buyer will pay for a property.

The recent flood events in Southern Alberta have been devastating, both from a personal and property point of view. Stories of how members of the real estate industry have come to the aid of victims are very encouraging; however this event will affect our communities and our real estate market for some time to come.

The big concerns are the disclosure issues down the road. This disaster brought forward a number of potential liability problems. What if the house had water in it, but has been “fully remediated”, do we have to disclose? If the property was in an affected area, but experienced no damage, do we have to disclose? If your listing is on a flood plain, do we disclose? What if it’s a condominium with no actual damage to the unit, but costly repairs to the common areas like parkades? The answer for all these questions is yes! Yes! Yes! And yes! Let’s examine these questions.

First, who defines “fully remediated”? Was the work inspected? Were the mold issues taken care of? What were the qualifications of the contractor? The courts have said that it is not up to the seller or the real estate professional to decide about adequate remediation, but instead the buyer to decide after they have received full disclosure.

In the second scenario, where there has been no damage, a seller will probably be all over me to disclose that there was no damage to their property even though they live in one of the affected areas. It will alleviate the potential buyers concerns. Also, there were many properties flooded this year that escaped in 2005. So, if we had been using the 2005 event as a benchmark in advising buyers (or avoiding disclosure) since then, we would have been wrong.

Third, if a property is on a flood plain, do you disclose? Of course you do! Many of our buyers in this economy come from out of town and are not familiar with the topography that makes one area flood prone and another not. Also, it’s not good enough to say that with all the publicity everyone should know about it. Let’s imagine that two years from now I have a buyer from Houston in my car and they have no recollection of a brief news story they might have seen about a flood in Calgary or surrounding area. Part of me fulfilling my duty of care is to disclose.

Finally, when a buyer is purchasing a condominium, they are not just buying a dwelling…they are buying into a corporation. It is my responsibility to inform them of all the steps they can take to research that condominium corporation for themselves. If the condominium had a parkade full of water, there may be structural issues or at least pending special assessments to be aware of even if there was no damage to the particular dwelling.

Some of the best advice I can give my clients in these circumstances is to consult with other professionals such as lawyers, engineers or town planners.  Make sure you deal with a professional agent that provides you with all the answers you need.

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