ATTENTION VIRGINIA HOME BUYERS AND SELLERS – NEW LAW REQUIRES SELLERS TO DISCLOSE RISK OF FLOODING TO PROPERTY
Effective January 2022
The new section of the Virginia Code, Section 55.1-708.2, requires “the owner of residential real estate property located in the Commonwealth who has actual knowledge that the dwelling unit is a repetitive risk loss structure shall disclose such fact to the purchaser.”
What is “Repetitive Risk”? The statute further defines that “repetitive risk” as “two or more claims of more than 1,000 were paid by the national Flood insurance Program within ant rolling 10-year period, since 1978.”
What is “Actual knowledge”? “Actual knowledge” as defined in the recent Supreme Court decision, is “when a plaintiff actually is aware of the relevant facts, not when he should be.”
For example, if the seller of a house was specifically told by their contractor that the stairs are broken and need immediate repairs, then the homeowner will likely be considered to have actual knowledge of the damage of the stairs. In a flooding disclosure situation, if the homeowner is informed that the house is or was flooded, either by a contractor or by other people who are aware of the situation, the in the eyes of the law, the homeowner will likely be considered to have “actual knowledge” of the incident.
Actual knowledge could also be supported by circumstantial evidence. For example, if the homeowners’ signatures appeared on the maintenance order in response to a flooding situation, then the homeowner will also likely be considered to have actual knowledge.
What is “Constructive Knowledge”? In comparison, “constructive knowledge” is when a person is legally presumed to know the information, regardless of if the person is actually aware of such information. “Constructive knowledge” can also be defined as the knowledge that a party should have reasonably possess in accordance to the level of due diligence needed. The concept of “constructive knowledge” targets people who are aware and suspicious of certain dangerous situations but choose to ignore them. For example, in a homeowner situation, if the homeowner is responsible for the maintenance of his or her place of residence and failed to address the huge pothole on their driveway, and then injured a visiting guest, then the homeowner will likely be considered to have “constructive knowledge” of the potential hazard that the pothole could potentially cause the visiting guest.
This section of the Virginia Code provides very thorough definition and standard of “repetitive risk.,” hence has left very little room for interpretation.
In conclusion, in the case of the newly enacted flooding disclosure requirement, the homeowners will need to have “actual knowledge” of the “repetitive risk” of flooding to be required to disclose the situation to the buyer. Due to the specific requirement of this section, it is a comparatively high bar to meet in order to trigger the legal disclosure requirement. The enactment of this specific section intends to improve the transparency among real estate transactions, and to reduce potential material concealment and fraudulent actions among participant of real estate transactions, but the practicality of this Virginia code might be limited due to the nature of the high bar and the specific requirements. When facing the most valuable purchase and on of the most important transactions in most people’s lives, seeking professional legal helps is always the key.
For more information, please read our article American Law Institute, The Practical Lawyer, “Caveat Emptor vs Seller Disclosure in Residential Real Property Conveyances,” by Faisal Moghul and Terry Fox (April 2021 Edition).
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