InsightsHow laws and landlords are protecting tenants against flood

In a changing regulatory environment, it’s imperative that rental property owners and managers understand what is included in their insurance coverage

Most tenants are unaware that the contents of their homes need to be covered by a separate insurance policy to be protected in the event of a flood. New regulations charge landlords with changing that.

In a changing regulatory environment, it’s imperative that rental property owners and managers understand what is included in their insurance coverage – and the varying responsibilities owners, property managers and tenants each have regarding flood risk. Buying renter’s insurance is, for conscientious tenants, a no-brainer. However, many renters are not aware that their renter’s insurance (like basic homeowner’s insurance) doesn’t cover flood damage or related relocation expenses. Some property owners aren’t tuned in to this issue either.

“Most property owners are aware of their flood risk, because in the process of securing a mortgage, their lender orders a flood zone determination. The buyer finds out whether the property is in a Special Flood Hazard Area (SFHA) and requires flood insurance as a prerequisite to closing the loan. What they may not be aware of is that content insurance is separate — that if they rent the property and there is a flood, the renter is not covered unless they have content insurance,” says Natascha DeVries, vice president of account management, flood, at ServiceLink.

Even if the property owner is aware, that information isn’t always shared with the tenants’ primary point of contact: the property manager. “When someone buys an apartment complex and one of the buildings is in a floodplain, the ownership group is aware of that SFHA status, but that information doesn’t always trickle down to the property management groups or landlords,” explains Mike Hanson, senior vice president, flood, at ServiceLink. “It’s a hole, in that federal compliance regulations are being met — the owner has been notified during the lending process and so they maintain flood coverage on the structure — but the personal property of renters in that building is not insured.” In recent years, this has started to change.

Tenant legislation has been enacted by several states to ensure that renters are better informed. While these laws and regulations differ by state, they hold landlords and property managers accountable for notifying tenants of any knowledge they have concerning flood risk. Tenants then have the opportunity to evaluate the circumstances and purchase their own insurance to protect their possessions.

What is the obligation of landlords and property managers to tenants?

Regardless of the laws in your state, it is advisable for landlords or property managers of buildings in a floodplain to disclose flood risk information to every tenant. Transparency supports a strong lessor-lessee relationship and helps protect both parties in the event a flood ever occurs, but that does not guarantee it will happen.

In states where regulations are in place, disclosure requirements may differ slightly. “For the most part, it’s a signed document at the time of renting, or at the time the tenant gets information for the rent, that states the unit the tenant is considering renting lies within an SFHA, and that, to better serve themself and protect their belongings, they should think about purchasing a flood insurance policy,” Hanson says.

Which states have tenant flood disclosure regulations?

To date, eight states — California, Georgia, Indiana, New Jersey, New York, Oklahoma, Oregon, and Texas — have enacted tenant flood disclosure legislation. Oklahoma and Georgia were the first, putting statutes into effect in 1986 and 1995, respectively, but momentum has begun growing in recent years, as California Government Code § 8589.45 went into effect on July 1, 2018, and Texas Property Code § 92.0135 went into effect on January 1, 2022, with more states set to follow as early as summer of 2024.

Which states are working to enact tenant flood disclosure regulations?

New proposed legislation is currently under discussion in Illinois, New Hampshire, Vermont, and Virginia, with some laws set to take effect as early as this year. In Florida, the legislation is set to begin on July 1, 2024, and requires landlords to make more specified disclosures for flood zones and to notify their tenants of any changes in the unit’s flood zone designation. Similarly, New Hampshire’s bill requires flood risks of certain properties to be disclosed to property owners, tenants, and lessees.

If history is a guide, more states are likely to follow, especially as weather events continue to grow in frequency and severity across the country. It would be prudent for property owners to act in anticipation of this eventuality by putting practices in place to ensure that tenants are informed even in the absence of active legislation.

How can landlords and property managers comply?

There are a few different ways to ensure cooperation. For starters, the landlord must assess the flood status of their rentable properties with a flood zone determination to determine whether or not a building is in a floodplain. If it is, the landlord needs to ensure that disclosures are provided to all prospective renters. A flood partner such as ServiceLink Flood can develop the messaging and a notification system to make that happen. In fact, ServiceLink Flood offers a Tenant Flood Report, designed specifically to inform tenants of their rental property’s flood risk status.

“The ServiceLink Tenant Flood Report is created according to each state’s specific requirements for the disclosure of flood risk information to the tenant,” says DeVries. “It includes a cover page listing the property information and a table of contents, a flood risk disclosure page, an aerial image, and a resource page. The report makes it easy for landlords to comply with their state regulations and can be valuable to insurance agents who sell renter’s policies, to see if contents insurance should be part of their discussion with the tenant.”

Tenant Flood Reports may be ordered through ServiceLink Flood’s secure online ordering platform. Once the tenant has been informed, the landlord’s responsibility ends. “It’s only incumbent upon the landlord to notify prospective renters that the apartment, house, or duplex they’re considering renting is in a flood zone and that flood hazard insurance is available if they want to purchase it,” says Hanson. “More helpful landlords might also research local insurance agents who are familiar with content-only policies and provide prospective tenants with a list of a few agents they can reach out to about securing a policy. It’s important to note that a landlord can only suggest that renters consider carrying a contents policy; they can’t require it.”

How can ServiceLink’s flood team support property owners and managers?

Established in 1988, ServiceLink’s flood division is one of the nation’s largest and most experienced flood certification partners. “Our company’s strength in technology, service, and flood tracking and compliance enables us to anticipate and fulfill the needs of customers across all business lines,” says DeVries. “We watch market and legislative activity closely so we can develop products such as the Tenant Flood Report to help our clients stay informed and compliant.”

To learn more about ServiceLink’s flood services and proactive actions you can take to inform and educate your tenants, connect with us at: svclnk.com/lenders/flood/.

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