ARIZONA STATE SENATE
Forty-eighth Legislature, First Regular Session
FACT SHEET FOR S.B. 2323
hazard disclosures; reports
Purpose
Permits a third party provider to offer a hazards disclosure report (report) to a buyer of real property and classifies as a class 1 misdemeanor a third party provider’s commission of any of four specified acts.
Background
Sellers of real property are obligated to disclose all known material facts about a property to the buyer. The Department of Real Estate (Department), on its website, has information regarding required disclosures concerning military and public airports, links to maps of expansive soil deposits and various other information to be aware of, and consider, before buying a home.
The public report application that a seller must file with the Department requires information regarding if the property is subject to any known flooding, expansive soils, geological conditions such as fissures or any known environmental conditions that may be detrimental to a purchaser’s health or if the subdivision is within a federal superfund site to be disclosed.
In 2006, H.B. 2779 permitted a third party to provide a report to a seller of real property, if authorized by the seller. A report must state if the real property is exposed to any of the following hazards: a) special flood hazard areas; b) military airports or ancillary military facilities; c) military training routes; d) public or private airports; e) expansive soils; f) soils subject to fissures; g) special tax assessment areas; h) radon gas potential zones; and i) environmental hazard superfund sites. The information must be based on officially adopted and electronically posted or readily available governmental maps or information (A.R.S. § 32-423). The bill also required a third party provider to carry insurance coverage with at least $10 million per occurrence.
There may be a fiscal impact associated with this measure due to an increase in the number of persons prosecuted and incarcerated in the county jails.
Provisions
1. Permits a third party to provide a report to the buyer of real property as authorized by the buyer.
2. Requires the report to disclose whether the real property is subject to:
a) one or more of the specified hazards, as opposed to any of the hazards.
b) military airports and ancillary military facilities, as opposed to one or the other.
c) public and private airports, as opposed to one or the other.
d) fissures as shown on earth fissure maps issued by the Arizona Geological Survey, as opposed to soils subject to fissures.
e) special tax assessment areas or taxing authority and the amount of special assessments in addition to ad valorem taxes, as opposed to special tax assessment areas.
f) environmental hazard superfund sites, including the sites listed in the Arizona Superfund Program List and the Water Quality Assurance Revolving Fund Registry or listed by the United States (U.S.) Environmental Protection Agency (EPA), including the National Priorities List and the Comprehensive Environmental Response Compensation and Liability Information System Database, or on maps issued by the Arizona Department of Environmental Quality (ADEQ) or equivalent databases of those sites, as opposed to environmental hazard superfund sites as shown in reports from the U.S. EPA or ADEQ.
g) any other condition that affects the real property that the buyer or seller authorizes and the third party provider agrees to provide in a report.
3. Prohibits requiring a buyer to provide the report to an insurance company, a lender or a governmental agency.
4. Specifies that the insurance coverage that the third party provider must carry be errors and omissions insurance coverage and changes the required limits to at least $1 million per occurrence and in an aggregate of at least $10 million.
5. Classifies as a class 1 misdemeanor a violation of the errors and omissions insurance coverage requirements.
6. Requires a third party provider, if an action is brought as a result of an error, inaccuracy or omission in the report made only by a third party provider, to indemnify the buyer or seller who authorized the report and persons licensed by the Department who represent the buyer or seller, as opposed to only the person.
7. Stipulates that no person is obligated to provide or purchase a report.
8. Prohibits the listing of a condition in a report from, in and of itself, making that condition material or immaterial to a particular real estate transaction; materiality is governed as otherwise provided by law.
9. Prohibits a third party provider offering a report from representing any of the following by any means and classifies a violation as a class 1 misdemeanor:
a) that the purchase of a report is required by law.
b) that a buyer, a seller or a person licensed by the Department who represents a buyer or seller is required to purchase a report.
c) that the third party provider offers protection from liability or information about property conditions that are not the subject of the report or that are not within the current ability of the third party provider to provide.
10. Subjects a third party provider who commits a misrepresentation or who does not obtain errors and omissions insurance coverage to enforcement through private action and prosecution by the Attorney General or the appropriate county attorney.
11. Permits a person who receives marketing materials, contracts or other communication that contain a misrepresentation to bring an action in any court of competent jurisdiction in the county in which the real property is located, or to pursue any other remedy permitted by law.
12. Makes the provider of a report who is found guilty of committing a misrepresentation liable to the party receiving the marketing materials, contracts or other communication for damages of not more than $2,000 per occurrence. Reasonable attorney fees and costs must be awarded to the successful party.
13. Makes technical changes.
14. Becomes effective on the general effective date.
House Action
COM 2/7/07 DPA 10-0-0-0
3rd Read 2/26/07 55-4-1-0
Prepared by Senate Research
March 8, 2007
LB/jas