HB2323

House of Representatives

hazard disclosures; reports

Sponsor: Representative Reagan

DPA	Committee on Commerce
DPA	Caucus and COW
X	As Transmitted to Governor

HB2323 clarifies the requirements for the real estate Hazard Disclosure Report and prescribes penalties for certain violations.

History

A person selling real property in Arizona is obligated by law to reveal all material facts concerning the property to the buyer, regardless of whether the buyer inquires about those facts. In order to assist the property seller in disclosing all legally required information, the Arizona Association of Realtors designed a Seller’s Property Disclosure Statement (SPDS). The SPDS is divided into six sections: Ownership and Property; Building and Safety Information; Utilities; Environmental Information; Sewer/Wastewater Treatment; Other Conditions and Factors/Additional Explanations. Each of these sections provides specific directions and examples to assist the seller in providing accurate information in the disclosure document.

Laws 2006, Chapter 384, added section §33-423 to the Arizona Revised Statutes, creating a Hazard Disclosure Report (Report) for real property based on officially adopted and electronically posted or readily available governmental maps or information. This optional Report may be obtained by the seller through an authorized third party. Additional stipulations of last year’s law include the following: property that requires a public report filed with the Department of Real Estate is exempt; specific hazards in the report are: special flood hazard areas; military airports or ancillary military facilities; military training routes; public or private airports; expansive soils; soils subject to fissures; special tax assessment areas; radon gas potential zones; and, environmental hazard superfund sites. Additionally, the new law requires the third party provider (Provider) to obtain a minimum $10 million insurance per occurrence. In the case of an action being brought that was a result of error, inaccuracy or omission in the disclosure made only by the third party provider, then the third party provider shall provide a defense against the action and indemnify the person for any judgment rendered and shall reimburse reasonable attorney fees and court costs, unless the person had knowledge of the error, inaccuracy or omission or the person modified the disclosure, thus causing the error, inaccuracy or omission. The new law states there is no liability for information disclosed and subsequently rendered inaccurate (after delivery of the Report) unless the person had actual knowledge of an error, inaccuracy or omission in the disclosure of information. The seller is not required to provide the report to an insurance company, a lender or a governmental agency.

HB 2323 clarifies Report content and permissible distribution, and prescribes penalties for certain violations.

Provisions

· Clarifies Reports may be distributed directly to buyers of real property (not just sellers).

· Stipulates that Reports shall include fissures that are shown on maps issued by the Arizona Geological Survey, rather than soils subject to fissures.

· Requires Reports to provide information about taxing authority and the amount of special assessments in addition to ad valorem (property) taxes. Current law requires the reports only to show the areas of special tax assessment shown in the county assessor’s current tax records.

· Reinserts the requirement to include Radon gas potential zones as shown on United States Environmental Protection Agency maps.

· Requires Reports to show environmental hazard superfund sites to include those listed in the Arizona superfund program list and the water quality assurance revolving fund registry, the United States Environmental Protection Agency (including the national priorities list), the comprehensive environmental response compensation and liability information system database, or maps issued by the Arizona Department of Environmental Quality. This information may also be obtained from other equivalent databases of these sites.

· Expands the Report to include any other condition that affects the property and that the buyer or seller authorizes and the third party report provider agrees to provide.

· Modifies the mandatory insurance requirements and assesses penalties as follows:

The insurance must be expressly errors and omissions insurance, and
Limits must include $1 million per occurrence (rather than $10 million) and an aggregate of at least $10 million dollars.
A violation is a Class 1 misdemeanor (6 mos./$2,500 fine)

· Clarifies that a Provider who is the defendant in an action brought as a result of an error, inaccuracy or omission in a Report must indemnify the buyer, seller or agent for the buyer or seller who authorized the Report.

· Clarifies the listing of a condition in a Report does not render that condition material or immaterial to any real estate transaction; the materiality of any disclosure is governed as otherwise provided by law.

· Directs a Provider to disclose in any agreement or marketing material that real estate buyers/sellers are not required by law to purchase a Report.

· Prescribes a Class 1 misdemeanor if a Provider represents in marketing materials, contracts or by any other means, any of the following:

That a Report is required by law to be purchased.
That a buyer, seller or licensed real estate agent or broker is required to comply with the Report requirements by purchasing a report.
That the Provider offers protection from liability for, or information about, property conditions that are not the subject of the Report or that are not within the Provider’s current ability to provide.

· Stipulates that violations are subject to enforcement through private action and prosecution by the attorney general or the appropriate county attorney.

· Authorizes a recipient of the illegal marketing materials, contracts or other communication to bring an action in any court of competent jurisdiction in the appropriate county.

· Stipulates that, in addition to any other remedies provided by law, a Provider found in violation of the marketing requirements is liable to the receiving party for damages (maximum $2,000 per occurrence). Additionally, the prevailing party in the action shall be awarded reasonable costs and attorney’s fees.

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· Forty-eighth Legislature