Starting Oct. 1st, Florida Sellers Must Disclose Past Flood Insurance Claims

Home sellers in Florida: Look out for a new flood insurance disclosure rule. Effective October 1, 2024, you must tell prospective buyers if your home has ever had documented flood damage.

Ask your Florida seller’s agent about the required flood disclosure — which the buyer must receive before signing the sales contract.

Specifically, the declaration must divulge past insurance or assistance claims on account of flooding. The flood insurance disclaimer will inform the buyer: “Homeowners’ insurance policies do not include coverage for damage resulting from floods.”

Buyers should consult their insurers about buying additional coverage for flood damage.

Flood Disclosure Is a Big Deal for Florida—And a Long Time Coming.

The new law takes a step in the direction of confronting development in places vulnerable to rising sea levels and floods.

Florida has many such parcels, especially on and around the coastline. Development continues at an alarming rate in those areas anyway. This creates a hazardous landscape for buyers, and a treacherous burden for taxpayers.

Florida is still one of the 18 states that doesn’t require flood disclosures in home sales. As we noted just last month:

Storm surges can flood homes. Due diligence is critical. Florida doesn’t have flood disclosure laws requiring communication to potential buyers.

In October, that changes.

When the Law Takes Effect, Will It Lower Florida Real Estate Prices?

The media coverage of this issue in itself will likely spur due diligence among out-of-staters who are thinking of moving to the Sunshine State. So, buyers could be less eager to flock to Florida’s riskiest areas. Because now, it’s the Florida government saying: there are climate-related risks buyers should hear about, and yes, these risks are real.

For some buyers, insurance could get so costly that the homes start dropping in value. Notably, Florida’s condo properties are already getting cheaper. Part of this is due to modifications of the Florida Condominium Act. Those changes mean condo associations have to maintain and document adequate reserve funds for maintenance and repairs. To comply, many condo properties will be raising their monthly condo association fees. That’s not exactly a draw for buyers.

All in all, buyers looking at pros and cons of buying shoreline property might have second thoughts, and go for something that’s less trouble to insure.

So, Buyers Will Be Better Informed. And Who Is Behind This Legal Change?

The Florida Association of REALTORS® has supported the new law. That makes sense. Agents are professionals. A conscientious agent wants both parties in the deal to feel well educated and fairly treated. So the Florida Association of REALTORS® has praised the law for supporting a home buyer’s informed decision-making process. Attorney Trey Goldman, on behalf of the agents’ association, told Inside Climate News:

We were supporters of this bill during the legislative session and are grateful that Gov. Ron DeSantis has signed it into law.

The agents’ group also thinks the state-level change will make clashes between former owners and new owners less likely.

You might ask: What happens when legal disputes over nondisclosure have come up?

Case law is mixed. A Florida court could find for either the tight-lipped seller or the waterlogged buyer.

In one case, alligators liked to use a particular home to get out of flood waters. The court sided with the tight-lipped one. After all, that area was famously flood-prone. Caveat emptor!

But Inside Climate News describes a different outcome in another case. Unbeknownst to its buyer, a beach home on the Florida panhandle was uninsurable due to its location on flood-prone land. The court sided with the waterlogged buyer.

Now, state law does, too.

The state’s lawmakers are grateful. The Florida legislature unanimously voted for the new rule. Yes, every single legislator supported the bill on behalf of their constituents, regardless of party lines.

What Does This Mean for the Florida Home Buyer Who Accepts the Risk, and Closes the Deal?

Some will accept the risk. Inside Climate News quotes Mark Friedlander, who represents the Insurance Information Institute: “People want to live on the ocean.”

It’s true, of course. Or at least it’s traditionally been the case. Counties with beachfronts are home to eight in 10 Floridians. Even after hurricanes wreak havoc on the coasts, people still want to live there.

But times are changing. The steep cost of insuring Florida’s real estate is taking its toll on owners — if they can get it at all. AAA has stopped renewing Florida policies. Farmers Insurance dropped Floridians altogether. Other companies have headed out of the state as well.

Note: The standard home insurance policy doesn’t come with flood coverage. If your home could be vulnerable to flooding, special flood coverage must be bought separately. This isn’t only in Florida; it’s true across the country. Know your home’s risk of flooding.

As noted by Bankrate.com, Florida home buyers should be advised to keep their roofs in good condition. Replace roofs before they become 15 years old, to keep them in good standing for insurance coverage under current Florida insurance laws. Further advice? Install hurricane panels to protect porches and keep the home’s exterior well maintained. Be aware of the risk of wind damage from large trees and potentially loose structures. Most important of all, understand your risks and research your insurance options before signing a purchase agreement.

Florida Flood Disclosure Law Is In Transition. More to Come.

Florida law already directs sellers to tell their buyers if a waterfront property is eroding or has been the subject of insurance claims involving sinkholes. Now, add past flooding claims to the list of mandatory disclosures.

But that’s hardly the last word on the subject. We can expect a lot more debate and eventual action to strengthen Florida’s flood disclosure rules. The new law doesn’t address some common scenarios, like these:

• The home was flooded, but the owner never made a claim. This “undocumented” flooding could go undisclosed. 

• The home is located in a flood zone. That doesn’t have to be disclosed. It’s up to the buyer or lender to check.

• The home is in an area where key access roads are subject to flooding. Although this also impacts a home’s value, it doesn’t have to be disclosed.

Meanwhile, if they haven’t yet started doing so, buyers in Florida and elsewhere will soon be looking at climate risks when they shop around. Watch for homes with relatively low risk and insurance costs to rise in value for this very reason.