NHD Reports: Who Is Responsible for What In the State of California?

Written by Will Caldwell

The bustling and beautiful state of California is one of the most desirable places in the world to live, and it’s easy to see why. Its economy alone is large to rank as fifth in the world if California were its own country, so there’s plenty of potential prosperity there in terms of work.

Along with the fiscals side of things, there’s the global entertainment capital of Los Angeles, the tech hub of San Francisco, and enough coastline and natural beauty to make anyone smile.

Yet the state is historically hit hard by natural disasters, so much so that it has unique rules and designations when compared to other regions. Each year residents of California rack up $4.14 billion in property damage, with wildfires being the most common disaster to strike the state.

A system centered around Natural Hazard Disclosure Reports (NHD Report for short) was created to educate and protect Californians against the common natural disasters of the state. It requires cooperation between the state of California, the seller of the house and the buyer, and when taken altogether it does provide a comprehensive safety net of information.

So before you pack up and head west, take the time to read and consider all the angles of living in California. Those who understand where the responsibility lies for NHD Reports are ideally equipped to navigate the housing market and end up in a home that truly meets their needs.

The Responsibilities of the State

California state law clearly outlines that an NHD report must be made available to an individual looking to purchase a home in California, and one of the primary functions of the report is to disclose if a residential or commercial space is in a hazard zone.

The state government are the ones who regulate these distinctions, and they are updated annually based on new environmental data — these six primary distinctions are:

  • Special Flood Hazard Area
  • Very High Fire Risk 
  • Wildfire Area 
  • Dam Inundation Zone 
  • Seismic Hazard Area 
  • Earthquake Fault Zone 

The main three disasters can be condensed as earthquakes, floods, and fires, but other factors and potential issues are covered in the report as well, such as air pollution level and unique property tax conditions. The NHD Report is a concise outline of everything the state feels a homeowner should know before buying a home.

While the state of California enforces that the legal requirements are met with house sales, they do not actually create the NHD Report themselves. That must be done by a reputable third party to ensure all the information is impartial and correct, which is precisely the service we provide for home sellers.

The Responsibilities of the Seller

In any California residential real estate deal, the responsibility of obtaining the Natural Hazard Disclosure Report falls upon the shoulders of the seller to provide to the buyer.

Fortunately, the process can be rather quick and painless, as one can obtain the evaluation and report for as little as $69.95 for a standard residential report. With us, the typical turnaround time can be almost immediate up to fifteen minutes, and these will cover all the legal requirements for a seller.

It’s important the seller then passes this information along to a buyer after they look into the report and confirm it matches the reality of the property’s risk. 

This step cannot be rushed or overlooked, as a seller who hides or withholds any information relating to the natural hazard risk of a home puts themselves at risk for a serious lawsuit. If an undisclosed disaster were to strike, they could be held potentially liable for the damages and subject to harsh penalties.

Also important to note is that the letter of the law in California Civil Code 11.03.2, which centers around the Natural Hazard Disclosure Report requirements, specifically requires that the seller “exercised good faith” in selecting their third-party report provider.

Going with just any cheap option might be attractive to some, but for a purchase as big as a home, this leaves the seller potentially vulnerable down the line. If it’s found they did not seriously look into the quality of the NHD Report, then they could be held partially responsible for the damages incurred by unmentioned natural disasters.

Going the extra mile doesn’t take much, and the amount of time and headache it can save later is well worth the investment. While it is the seller who must obtain the NHD Report, the buyer must be the one to read and understand its content.

The Responsibilities of the Buyer

Once a buyer knows all the risk designations the home falls under, they can then more accurately gauge the cost of the purchase. After the NHD Report has been commissioned and sent, the buyer then has a three-day window of opportunity to review the document. 

Some of the major six distinctions like Special Flood Hazard Areas require additional insurance specifically to offset the risk, and this will drive up the total cost of living on the property. Other information such as if a sex offender lives in the area might also be disclosed in the report, which would understandably impact the decision of a family moving into the area.

If the report reveals a hazard designation or information that makes the sale no longer tenable to the buyer, they can withdraw their offer at no expense and receive their deposit back in full.

If both the buyer and seller are comfortable with completing the sale after the review period, then the document is signed by both parties. No sale can be legally called closed in California without this, and for most, it marks the final step to ensure the sale is final.

The Natural Hazard Disclosure Report functions to ensure that the seller and buyer alike follow the guidelines set by the state of California to keep its residents safe and informed.

In making all the critical information about an area easily available to all the involved parties, the NHD Report gives everyone a realistic picture of what living in a home entails. Once the risks are understood by the buyer, then they can focus on enjoying all the beautiful benefits of California living.