Mar 2024

Law Alert: New Jersey Mandates Flood Risk Disclosure for Property Sales and Leases

As a response to increases in flooding risks resulting from global warming, on July 3, 2023, New Jersey enacted The Flood Risk Notification Law (P.L. 2023, c.93).  The law codifies new flood risk disclosure requirements applicable to residential and commercial sales and leases of real property in New Jersey.  The law becomes effective on March 20, 2024.

For sellers of real property, the law requires that property owners use a property condition disclosure statement to notify prospective purchasers of whether the property is located within a FEMA Special or Moderate Risk Flood Hazard Area, and to otherwise notify prospective purchasers of any actual knowledge the seller may have of flood risks to the property.

For landlords, the law requires that they disclose, prior to lease signing or renewal, whether the property to be leased is located within a FEMA Special or Moderate Risk Flood Hazard Area, and to otherwise notify prospective tenants of any knowledge of historic flooding in the building or parking areas of the property to be leased.

The NJDEP’s website for the new law includes links to the text of the law, as well as additional tools to assist New Jersey real estate sellers and landlords to comply with the law’s requirements.  These include:

  • For sellers, a form of property condition disclosure statement that must be used in real estate sales to indicate whether the property in question is located in the FEMA Special Flood Hazard Area or Moderate Risk Flood Hazard Area, and to disclose actual knowledge of flood risks. The form of disclosure statement is one that is typically used in residential sale transactions, and includes statements regarding a myriad of condition issues in addition to flood risk issues.  For commercial real estate sales, the disclosure statement should only include the statements regarding flood risks (a separate section at the end of the disclosure statement, including items 109 through 117).
  • For landlords, a form of flood disclosure notice to be used in lease transactions to indicate to prospective and current renters whether the property in question is located in the FEMA Special Flood Hazard Area or Moderate Risk Flood Hazard Area, and disclose the landlord’s actual knowledge that the property or portion of the property, including parking areas, have historically been subjected to flooding. Exemptions from the lease notice requirements include dwelling units in premises containing not more than two dwelling units, owner-occupied premises of not more than three dwelling units, and hotels, motels, or other guest houses serving transient or seasonal guests.
  • A flood indicator screening tool that will assist sellers and landlords with providing information regarding the presence of indicators of potential flood risk on or near their properties. The screening tool maps the location of waterways, FEMA Flood Zones, State Flood Hazard Areas (and associated Design Flood Elevation profiles).  It also provides information on New Jersey’s Tidal Climate Adjusted Flood Elevation, depicting future sea-level conditions in tidal areas.

For both commercial and residential real estate sales and lease transactions, best practices would be (i) to provide the completed property condition disclosure statement (in the case of a sale) or flood disclosure notice (in the case of a lease transaction) to the prospective purchaser or tenant prior to the execution of the sale contract or lease document, and have the applicable document counter-signed by the prospective purchaser or tenant, and (ii) to include in the sale contract or lease document an acknowledgment by the purchaser or tenant that it has been provided the applicable disclosure document (a fully-executed copy of which should be attached to the sale contract or lease document as an exhibit).

Please contact EC real estate attorney Richard Cohn for additional information or assistance in complying with these new requirements.

For over forty years, Rich has focused his practice on sophisticated commercial real estate transactions, including commercial acquisitions and dispositions of office buildings, shopping centers, hotels and commercial, industrial and manufacturing facilities; acquisition and assembly of land; office, retail and industrial leasing; zoning, land use planning and urban redevelopment; formation and organization of real estate ownership and development entities; and real estate financing transactions.