Climate Change and Real Estate in California: Can Climate-Related

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Climate Change and Real Estate in

California: Can Climate-Related Risk be

a Required Disclosure for Residential

Real Estate?

LINDSEY JACQUES*

TABLE OF CONTENTS

I. INTRODUCTION ........................................................................................ 260

II. CURRENT DISCLOSURE REQUIREMENTS FOR CLIMATE CHANGE

RELATED RISK ......................................................................................... 263

A. California Statutory Law ............................................................... 263

B. California Common Law................................................................ 265

III. EXPANDING THE LAW TO REQUIRE A DUTY TO DISCLOSE THE

CLIMATE SCIENCE.................................................................................... 267

A. Using Legislation to Expand Liability ........................................... 267

B. Expanding Common Law ............................................................... 269

1. Climate Change Science as a Material Fact ........................... 269

2. Level of Knowledge ................................................................. 271

3. Reasonability Standard ........................................................... 272

C. Comparing Residential Property Climate Disclosure

Liability to SEC Climate Disclosure Requirements ....................... 273

IV. TESTING EXPANSION OF DISCLOSURE REQUIREMENTS

WITH HYPOTHETICALS ............................................................................. 277

A. Sea Level Rise ................................................................................ 277

B. Increased Flooding ........................................................................ 278

C. Increased Fire Risk ........................................................................ 280

D. The Overarching Issues of Time and Knowledge of Buyer ............ 281

V. CONCLUSION ........................................................................................... 283

2019, University of Wisconsin-Madison.

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I. INTRODUCTION

It is widely known that climate change is real, unequivocal, and leads

to increases in extreme weather events and natural disasters, but the link

between climate change and real estate is increasingly relevant and seldom

discussed.

California is certainly at risk for extreme climate events, and

the state receives a large amount of media coverage regarding that risk

(primarily from the detrimental wildfires that sweep across the state).

The

high probability of climate change related disaster poses serious problems

for Californian homeowners.

Researchers have found that over 100 thousand Californians are at risk

of coastal flooding

and the state is at increasing risk of a megaflood

because of climate change.

Tens of thousands of homes in California are

at risk of being effected by sea level rise,

and wildfires are already threatening

tens of thousands of houses in the state every year,

with the number and

severity of these wildfires only increasing.

Research shows that homebuyers

in California are not factoring sea level rise into house purchasing decisions,

and two trillion dollars of real estate is at risk of wildfire impact in

California, but research on whether wildfire risk impacts home prices is

1. Richard P. Allan et al., IPCC, 2021: Summary for Policymakers, INTERGOVERNMENTAL

PANEL ON CLIMATE CHANGE (2021) [hereinafter IPCC Report], https://www.ipcc.ch/report/

ar6/wg1/downloads/report/IPCC_AR6_WGI_SPM.pdf [https://perma.cc/DK9D-8K8U]

(summarizing CLIMATE CHANGE 2021: THE PHYSICAL SCIENCE BASIS, Intergovernmental

Panel on Climate Change (2021)).

2. U. S. ENV’T PROT. AGENCY, WHAT CLIMATE CHANGE MEANS FOR CALIFORNIA,

EPA 430-F-16-007 (Aug. 2016), https://www.epa.gov/sites/default/files/2016-09/documents/

climate-change-ca.pdf [https://perma.cc/NM9Y-6MS3].

3. MATTHEW HEBERGER et. al., THE IMPACTS OF SEA-LEVEL RISE ON THE CALIFORNIA

COAST, CALIFORNIA CLIMATE CHANGE CENTER, CEC-500-2009-024-F, 21 (May 2009),

https://pacinst.org/wp-content/uploads/2014/04/sea-level-rise.pdf [https://perma.cc/C6NK-

9Q3J].

4. Xingying Huang & Daniel Swain, Climate Change is Increasing the Risk of a

California Megaflood, 8 Sci. Advances (Aug. 12, 2022), https://www.science.org/doi/

pdf/10.1126/sciadv.abq0995 [https://perma.cc/J3VR-79U2].

5. William Yu, Sea Level Rise and Its Impact on California Housing Markets,

UCLA ANDERSON FORECAST, 73 (Dec. 2020), https://anderson-review.ucla.edu/wp-content/

uploads/2021/03/uclaforecast_Dec2020_Yu.pdf [https://perma.cc/EM7G-DKQE].

6. Rosmery Izaguirre, Worst Fires in California History: Dixie, Camp and More,

LA TIMES (Aug. 24, 2021, 10:55 PM), https://www.latimes.com/california/story/2021-

08-24/worst-fires-in-california-history-dixie-camp-and-more [https://perma.cc/QL75-F946].

7. Adam Voiland, What’s Behind California’s Surge of Large Fires?, NASA:

EARTH OBSERVATORY, https://earthobservatory.nasa.gov/images/148908/whats-behind-

californias-surge-of-large-fires [https://perma.cc/63H8-PTXY].

8. Yu, supra note 5.

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still unclear.

Broad U.S. studies show that homes in flood zones are overpriced

by $43.8 billion.

While scientists know of and have studied the climate

change related risks to housing,

prospective home buyers may not

know of such risks. Despite this, California does not require disclosures

of scientifically predicted climate change related risks including increases in

wildfire risk, sea level rise risk, or increased flood risk.

As a result,

prospective home buyers are on their own to determine their safety, home

value, and the security of their investment, especially over the long term.

Current flood disclosure requirements in California require disclosures

of actual knowledge if the home is in a flood hazard area,

but even the

current director of Federal Emergency Management Agency (FEMA) (which

provides flood zone maps that impact California hazard assessments)

has

publicly admitted their maps are not adequately representative of flooding

caused by climate caused extreme weather events.

It is particularly hard

to integrate climate risk into flood maps because this requires thorough

analysis of local infrastructure to determine flood risk, but FEMA’s director

stated the importance of assessing future threats from climate change.

Similarly, current fire risk disclosure requirements, which require disclosure

if a property is in a “high” to “very high” fire hazard severity zone,

current

9. BER Staff, California Wildfires’ Effect on Berkeley Home Prices, BERKELEY

ECON. REV., Feb. 10, 2020, https://econreview.berkeley.edu/california-wildfires-effect-

on-berkeley-home-prices/ [https://perma.cc/DQ8V-TQDY].

10. Miyuki Hino & Marshall Burke, The Effect of Information About Climate Risk

on Property Values, 118 PNAS 1 (2021), https://www.pnas.org/doi/pdf/10.1073/pnas.

2003374118 [https://perma.cc/9B56-E4KH].

11. Yu, supra note 5; id.

12. See infra Section II.

13. CAL. GOV’T CODE § 8589.45 (West 2018).

14. MyHazards, CAL OES, https://myhazards.caloes.ca.gov/ [https://perma.cc/

2WKW-BSGW] (last accessed Oct. 20, 2022).

15. State of the Union: Interview With FEMA Administrator Deanne Criswell (CNN

television broadcast Sept. 4, 2022, 9:00 AM ET), https://transcripts.cnn.com/show/sotu/

date/2022-09-04/segment/01 [https://perma.cc/RNZ3-NTPG]; Sarah Kuta, Federal Flood

Maps are Outdated Because of Climate Change, FEMA Director Says, SMITHSONIAN

MAG. (Sept. 9, 2022), https://www.smithsonianmag.com/smart-news/federal-flood-maps-

are-outdated-because-of-climate-change-fema-director-says-180980725/ [https://perma.cc/

65HJ-JM9S].

16. State of the Union: Interview With FEMA Administrator Deanne Criswell (CNN

television broadcast, Sept. 4, 2022, 9:00 AM ET), https://transcripts.cnn.com/show/sotu/

date/2022-09-04/segment/01 [https://perma.cc/RNZ3-NTPG]; Kuta, supra note 15.

17. Adam Voiland, What’s Behind California’s Surge of Large Fires?, NASA:

Earth Observatory, https://earthobservatory.nasa.gov/images/148908/whats-behind-californias-

surge-of-large-fires [https://perma.cc/63H8-PTXY].

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fire hazard severity zones haven’t been updated since 2008-2011

thus

not based on the most recent climate science showing stark increases in

wildfire risks.

Disclosure of climate-related risks to prospective homeowners is

imperative to ensure: (1) land investments continue with reliable and accurate

security, (2) accurate pricing reflecting future risk, and (3) homeowners

are adequately insured. As climate change worsens, dangerous weather

events are becoming more frequent and severe.

With no statutory disclosure

requirements of future climate related risk, it is yet to be determined whether

the common law allows for liability for failure to disclose these future

risks to be attached to sellers, brokers, or developers for damage caused

by undisclosed climate change related risk. In analyzing the common law,

this hinges on whether climate risk is material, what level of knowledge is

required, and the standard. This Article explores the potential for liability

related to climate risk disclosure.

Key to understanding whether liability can stretch to cover undisclosed

climate-related risk is the certainty of a specific climate change related

event. A valuable tool in discussing foreseeability is the varying levels of

confidence and likelihood for different climate change risks developed by

the Intergovernmental Panel on Climate Change (IPCC).

In this Article,

the levels of certainty discussed includes both the IPCC’s levels of confidence

and likelihood.

“[L]evel of confidence is expressed using five qualifiers:

very low, low, medium, high and very high.”

The likelihood of an outcome

or a result is noted with the following verbiage: “virtually certain 99–

100% probability, very likely 90–100%, likely 66–100%, about as likely

as not 33–66%, unlikely 0–33%, very unlikely 0–10%, exceptionally unlikely

0–1%. Additional terms (extremely likely 95–100%, more likely than not

>50–100%, and extremely unlikely 0–5%) may also be used when

18. Fire Hazard Severity Zones, OFF. OF THE STATE FIRE MARSHAL, https://osfm.

fire.ca.gov/divisions/community-wildfire-preparedness-and-mitigation/wildfire-preparedness/

fire-hazard-severity-zones/#:~:text=Fire%20Hazard%20Severity%20Zones%20are,in%20

local%20jurisdictions%20as%20well [https://perma.cc/5DKY-882M] (last visited Oct.

19, 2022).

19. Voiland, supra note 17.

20. Id.

21. IPCC Report, supra note 1, at 4.

22. The certainty evaluation described is used in the IPCC Summary for Actuaries

and Policy Makers. International Actuarial Association, Climate Science: A Summary for

Actuaries (Mar. 2022), https://www.actuaries.org/IAA/Documents/Publications/Papers/

Climate_Science_Summary_Actuaries.pdf [https://perma.cc/8ZK3-NELG]; Lisa V. Alexander

et al., IPCC, 2013: Summary for Policymakers In: Climate Change 2013: The Physical

Science Basis, Intergovernmental Panel on Climate Change (2021), https://www.ipcc.ch/

site/assets/uploads/2018/02/WG1AR5_SPM_FINAL.pdf [https://perma.cc/437W-WA3X].

23. IPCC Report, supra note 1, at 4 n.4 (emphasis added).

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appropriate.”

To extend liability to sellers or their agents, the court will

have to adopt a level of certainty required for liability to adhere. The level

of certainty required by the court may depend on the specific type of

climate change related risk in question.

This Article will examine whether liability can extend to residential real

estate sellers for non-disclosure of climate change related risk. First, this

Article will outline current California statutes and common law regarding

disclosures of climate change risk to prospective buyers of real estate.

Next, this Article will explore potential routes for expanding liability, then

will follow with hypotheticals for specific types of climate-related risk.

This Article concludes by considering likely outcomes and routes for sellers

and their agents to evade such liability should an expansion of liability prove

legitimate.

II. CURRENT DISCLOSURE REQUIREMENTS FOR CLIMATE CHANGE

RELATED RISK

While statutory disclosure requirements do exist for current climate

related risks, they fail to encompass future and increases in risk created

by climate change both in statutory language and through current mapping-

based disclosures. Without statutory requirements for disclosure, common

law is the only means by which liability could be created for failure to

disclose these risks. This section lays out California’s statutory framework

regarding seller side disclosure requirements for climate change related

risks. This section proceeds to walk through the relevant common law

framework to provide context as to how this area of law could be expanded

to include liability for non-disclosure of climate related risks.

A. California Statutory Law

California’s statutory framework regarding disclosure is limited, but

there are some required disclosures for climate-related risks. In 1985,

California enacted the first statute on seller and broker disclosures, requiring

disclosures for a property’s condition, value, and desirability.

Codification

of the state’s common law framework, established in Lingsch v. Savage

and Easton v. Strassburger, helped to form California’s statutory framework

24. Id. (emphasis added).

25. S.B. 453, ch. 223, § 4 (Cal. 1985).

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for real estate disclosures.

These cases, codified in California statutory

law, require both sellers and brokers to engage in discovery and disclose all

material information related to the value and desirability of the property.

California Civil Code Section 2079 states that:

[i]t is the duty of a real estate broker or salesperson . . . to a prospective buyer of

residential real property . . . to disclose to that prospective buyer all facts

materially affecting the value or desirability of the property that an investigation

would reveal, if that broker has a written contract with the seller to find or obtain

a buyer or is a broker who acts in cooperation with that broker to find and obtain

a buyer.

While this law requires disclosure of material facts, it does not specify:

(1) what a material fact is, (2) the reasonability standard (subjective versus

objective standard) for determining value and desirability, or (3) the standard

of the investigation.

New additions to the statutory disclosure requirements have come into

law since the codification of the common law requirements. The duties of

disclosure require the disclosure of major fire or flood damage and visual

inspections, but this general duty does not cover whether there is a

requirement to disclose future increased risk of disaster from climate

change.

Under California law, a seller (or seller’s agent) must disclose

to prospective buyers when the property is in one of the following

hazardous areas or situations:

1. special flood hazard area as designated by FEMA where the

seller or her agent has actual knowledge or the local

jurisdiction has specified that the parcel is within a special

flood hazard area;

2. a high or very high fire hazard severity zone as determined

by the Director of Forestry and Fire Protection (CAL FIRE)

based on consistent statewide criteria and based on the severity

of fire hazard that is expected to prevail in those areas

; and

3. specified features that may make the home vulnerable to

wildfire and flying embers and disclose which of the listed

features, if any, exist on the home of which the seller is aware.

26. Easton v. Strassburger, 152 Cal. App. 3d 90, 102 (1984).

27. S.B. 453, ch. 223, § 4 (Cal. 1985).

28. CAL. CIV. CODE § 2079 (Deering, LEXIS through 2022 Sess.) (emphasis added).

29. CAL. CIV. CODE §1102.6 (Deering, LEXIS through 2022 Sess.).

30. CAL. GOV’T. CODE § 8589.3 (West 2000) (effective Jan. 1, 2000) (information

of hazards can be obtained from the California Office of Emergency Services web site).

31. CAL. CIV. CODE § 1102.19 (West 2021) (effective July 1, 2021).

32. CAL. GOV’T. CODE § 51178 (West 2022).

33. CAL. CIV. CODE § 1102.6f(a)(3) (West 2021) (effective Jan. 1, 2021).

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Many of these disclosure requirements are relatively recent, coming into

law in the past few years.

The question remains as to whether there could be a duty to disclose

other foreseeable climate change related risks, such as sea level rise, increase

in wildfire risk, or other climate-related weather damage. The current

climate risk disclosure framework is essentially caveat emptor: the buyer

must beware when it comes to climate change risk impacting a residential

property purchase.

B. California Common Law

California common law provides greater insight into the potential for

disclosure liability expansion. However, the existing common law scheme

does not directly address the issue this Article analyzes: climate change

risk disclosure. Additionally, while California case law discusses present

risk or fact, increases in risk and future risk are not mentioned. While

historical case law has been codified, recent case law provides more context

and clarity on how to push the bounds of the common law framework to

include climate change risk as a required disclosure.

Important to the analysis of disclosure are whether facts are known or

could be known, and whether they are material. Under common law, “where

the seller knows of facts materially affecting the value or desirability of

the property . . . and also knows that such facts are not known to, or within

the reach of the diligent attention and observation of the buyer, the seller

is under a duty to disclose them to the buyer.”

Furthermore, “[u]ndisclosed

facts are material if they would have a significant and measurable effect

on market value.”

Easton v. Strassburger, the leading case in the applicable area of law,

was codified under California legislation and imposed a duty for sellers

and agents to discover material issues.

This case created a cause of

action for negligent misrepresentation of issues that the seller or agent had

a duty to investigate.

California’s 1985 disclosure law was a direct

34. Denis Binder, The Duty to Disclose Geologic Hazards in Real Estate Transactions, 1

CHAP. L. REV. 13, 13 (1998).

35. Lingsch v. Savage, 213 Cal. App. 2d 729, 735 (1963).

36. Shapiro v. Sutherland, 64 Cal. App. 4th 1534, 1544 (1998).

37. Easton v. Strassburger, 152 Cal. App. 3d 90, 103 (1984).

38. Robert H. Cutting et al., “Location, Location, Location” Should be “Environment,

Environment, Environment”: A Market-Based Tool to Simplify Environmental Considerations

in Residential Real Estate, 6 GOLDEN GATE U. ENV’T L.J. 83, 102 (2012).

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response to Easton and placed boundaries around the broader field of liability

that Easton had introduced.

The California legislature emphasized that

it intended for its statute to make the Easton disclosure requirements clear

and easy to follow.

The other principal case for disclosures is Lingsch v. Savage, which

expanded the scope of the seller’s duty to disclose material facts to a

prospective buyer.

The court states:

where the seller knows of facts materially affecting the value or desirability of

the property which are known or accessible only to him and also knows that such

facts are not known to, or within the reach of the diligent attention and

observation of the buyer, the seller is under a duty to disclose them to the buyer.

Failure to disclose constitutes actual fraud.

This case creates some

nuance, however, as it specifies that disclosure is only required when the

material facts are only known and accessible to the seller, where the seller

knows the buyer does not know of the facts, and the buyer likely would

not be able to learn the facts.

Reed v. King further discusses materiality, stating that “[t]hree considerations

bear on this legal conclusion [of what is material]: the gravity of the harm

inflicted by nondisclosure; the fairness of imposing a duty of discovery

on the buyer as an alternative to compelling disclosure, and the impact on

the stability of contracts if rescission is permitted.”

In this case, the court

permitted the history of murder on a property as material information

impacting the value and desirability of the property.

The court noted,

however, that “[a] more troublesome question would arise if a buyer in

similar circumstances were unable to plead or establish a significant and

quantifiable effect on market value.”

The duty to disclose reasonably obtainable material information is

further discussed in Assilzadeh v. California Federal Bank.

The court

stated that an “agent’s duty to disclose material information to the principal

includes the duty to disclose reasonably obtainable material information.”

This obligation “requires investigation of facts not known to the agent and

39. E.g., id. at 107.

40. CAL. CIV. CODE § 2079.12 (Deering, LEXIS through 2022 Sess.).

41. Lingsch v. Savage, 213 Cal. App. 2d 729, 738 (1963).

42. Id. at 735 (emphasis added).

43. Id. at 736.

44. Reed v. King, 145 Cal. App. 3d 261, 266 (1983).

45. Id. at 268.

46. Id. (emphasis added).

47. Assilzadeh v. Cal. Fed. Bank, 82 Cal. App. 4th 399, 415 (2000).

48. Id. (emphasis added) (quoting Field v. Century 21 Klowden-Forness Realty, 63 Cal.

App. 4th 18, 25 (1998)).

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disclosure of all material facts that might reasonably be discovered.”

a result, this case establishes a reasonable person type standard. Furthermore,

Assilzadeh clarifies which undisclosed facts are considered material:

“[u]ndisclosed facts are material if they would have a significant and

measurable effect on market value.”

This materiality depends on the

facts of the particular case.

The court also states “[t]he seller or his or

her agent must have actual knowledge in order to be liable for failing to

disclose a material fact.”

Assilzadeh establishes that when sellers have

actual knowledge of facts with a significant and measurable effect on the

market value of a property, and these facts are not known to or are not

within the diligent attention and observation of the buyer, there is a duty

to disclose.

III. EXPANDING THE LAW TO REQUIRE A DUTY TO DISCLOSE THE

CLIMATE SCIENCE

To extend liability for failure to disclose climate change risks, there are

two primary routes: (1) enacting legislation, or (2) expanding the common

law. This section will begin by discussing the use of legislation to expand

liability for disclosure of climate related risks, specifically discussing the

example of Hawaii’s new legislation. This section will proceed by explaining

how common law could potentially be expanded to include risk of climate

related risks as a material fact requiring disclosure. This section will end

with an analysis of new SEC climate disclosure requirements, and how

this new law may be relevant to real estate disclosures.

A. Using Legislation to Expand Liability

The simplest way to attach liability for non-disclosure is to pass legislation

mandating disclosure requirements. Under this route of extending liability,

disclosure would be statutorily required, so a failure to disclose would

create clear liability. There would be no need to stretch the common law

or to create attenuated legal connections to attach liability if a state adopts

legislation requiring disclosure. However, the key to success under this

49. Id. (emphasis added) (quoting Field v. Century 21 Klowden-Forness Realty, 63

Cal. App. 4th 18, 25–26 (1998)).

50. Id. at 410 (emphasis added).

51. See id. at 416.

52. Id. at 410 (emphasis added).

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path of regulating liability is to ensure several climate change risks are

covered by the legislation, not just a single climate-related issue. If this

sort of legislation were enacted, it would also be important to include past,

present, and future climate change-related risk. An all-encompassing

timeline would provide the buyer with the most knowledge, allowing for

the most informed buying decision possible.

An example of legislatively required disclosures is seen with Hawaii’s

recent codification of sea level rise disclosures relating to real property

transactions.

On July 6, 2021, the state passed Hawaii Act 179 (Senate

Bill 474) to require “mandatory seller disclosures in real property transactions

[to] include indication that a residential real property lies within the sea

level rise exposure area.”

The legislation goes on to define material fact

as, “any fact, defect, or condition, past or present, that would be expected

to measurably affect the value to a reasonable person of the residential

real property being offered for sale.”

The legislation states that “[t]he

value of property lying within the boundaries of a sea level rise exposure

area will likely be affected over time, which the legislature determines to

be a material fact that should be disclosed by the seller in a real property

transaction.”

This legislation, codified in Hawaii Statute 508D-15, requires sellers to

disclose the climate change risk of sea level rise to home buyers via

enactment of statutory law—thus, evading the need to extend common law

to attach liability for non-disclosure.

While this statute fails to overtly

include “future” in the definition of material defect, the law explicitly

states that sea level is a present condition that will affect property value

over time, which is sufficient in creating liability.

For states enacting

legislation in the future, addressing climate change either as a present or

future risk is likely sufficient so long as it is adequately specified as such

under the definition of “material fact.”

Hawaii specifically drafted its legislation to address disclosure of sea

level rise to prospective homebuyers;

however, if the Hawaiian legislature

had simply stated “material fact” without specifically stating that sea level

rise fits within the definition, it would be uncertain whether sea level rise

would fit within the definition of “material fact.” While sea level rise very

likely rises to the level of being a “fact,” whether sea level rise could be

53. S.B. 474, 31st Leg., Reg. Sess. (Haw. 2021).

54. Id.

55. Id. (emphasis added).

56. Id. (emphasis added).

57. HAW. REV. STAT. § 508D-15 (2014).

58. Id.

59. Id.

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included within the definition of “material fact” would hinge on whether

sea level rise could be classified as a “present” condition or fact. An

argument to include sea level rise risk in the definition of material fact

would argue that while it may be a future condition or risk, sea level rise

is certainly a “present” fact that will measurably affect the value of the

property. They would argue that even the “present” knowledge of the

future condition or future risk of sea level rise has a long-term impact on

property value and that a reasonable person would know this, regardless

of whether home values are actually decreasing. Alternatively, an argument

against including sea level rise in the definition of “material fact” is that

sea level rise is not a “present” condition, but rather a future condition not

presently affecting property value. While the future sea level rise risk may

constitute a “present” fact, the actual water encroachment on property is

not yet a “material fact,” defect, or condition. This thought experiment

highlights the importance of including the specific climate change risk

and specific language regarding the timing of the risk in the legislation or

definition of “material fact” to ensure legislative and legal clarity.

B. Expanding Common Law

If there is no legislation mandating climate change related disclosures,

liability can only attach by expanding common law to include a required

disclosure of future or foreseeable scientifically predicted risk. In expanding

the common law, there are three key questions:

1. Can climate change risk be considered a material fact?

2. What level of knowledge is necessary?

3. Is it reasonable that sellers or their agents have knowledge

of the climate change risk to residential property?

In considering these questions, it is essential to revisit the IPCC report.

The IPCC levels of certainty of climate risk ranks and defines the likelihood

of climate change related events.

1. Climate Change Science as a Material Fact

“Material facts” are facts that relate to the cause of action, claim for

damages, issue of duty, or affirmative defense that is the subject of the

60. IPCC Report, supra note 1.

61. Id. at 4 n.4.

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motion and that could make a difference in the disposition of the motion.

Current case law does not treat climate science as a material fact, but that

does not mean “material facts” cannot expand case law to include climate

science.

Determining whether scientific research and analysis regarding climate

change can be a “material fact” is crucial in the assessment of liability

expansion under California common law. As established in Reed and

Lingsch, “whether information ‘is of sufficient materiality to affect the

value or desirability of the property . . . depends on the facts of the particular

case.’”

There is a duty only to disclose factual matters that bear upon the

quality of the property that might be detrimental to the value of the

property.

In California, examples of this include a property that is on

filled land, a structure violating building or zoning codes, a condemned

building, or a termite-ridden structure.

This duty to disclose only addresses

present risk, not the present or current threat of increased risk or future

risk.

Under Assilzadeh, a fact is material if it has a significant and measurable

effect on market value. Climate change risks—such as sea level rise,

increased flood risk, and increased wildfire risk—create a large effect on

market value and desirability of certain property.

For example, the

likelihood of significant sea level rise in the coming decades will very

likely impact the market value and desirability of a house located next to

the ocean. This is precisely the issue the Hawaiian statute aims to address.

However, fulfilling the requirement of “measurable effect” is more

challenging for other climate risks. As stated in Reed, the liability question

becomes more troublesome when the effect on market value is not

quantifiable.

This measurability issue could be improved by integrating

the IPCC’s certainty standards into law, thus giving courts clearer guidelines

and analysis of climate change related risk.

In sum, to determine that a climate change risk is a “material fact,” the

climate change related risk must: (1) be a factual matter, (2) impact quality

62. CAL. R. CT. 3.1350(a)(2).

63. STANTON T. MATHEWS & ANOUSH LANCASTER, CALIFORNIA CAUSES OF ACTION

§ 1:34c (James Publishing 2018).

64. Id.

65. Id.

66. Assilzadeh v. Cal. Fed. Bank, 82 Cal. App. 4th 399, 415 (2000).

67. Simon Moore, Is Your Home Value at Risk from Climate Change? Recent

Research Finds a Link, FORBES (Aug. 30, 2021, 5:57 PM), https://www.forbes.com/sites/

simonmoore/2021/08/30/is-your-home-value-at-risk-from-climate-change-recent-research-

finds-a-link/?sh=398a9282e220 [https://perma.cc/UZW8-WWSA].

68. S.B. 474, 31st Leg., Reg. Sess. (Haw. 2021).

69. Reed v. King, 145 Cal. App. 3d 261, 268 (1983).

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of the property, (3) create a significant effect on the property’s market

value, and (4) create a measurable effect on the property’s market value.

Applying the IPCC levels of confidence, the likelihood of climate events,

and the credibility of the IPCC, a strong argument is made for classifying

climate science as a “factual matter.”

The impact on quality and significant

and measurable effect on market value may be more difficult to show, but

studies show that there is a significant and measurable impact on what the

value should be, even if actual monetary value doesn’t reflect this.

Therefore, climate change science could potentially extend liability for

climate-related risk by satisfying as a “material fact.”

2. Level of Knowledge

Another question concerning common law expansion is what level of

knowledge of a climate change risk is required for liability to attach. The

Supreme Court defines “actual knowledge” to mean “. . . when a plaintiff

actually is aware of the relevant facts, not when he should be.”

Alternatively,

negligence cases attach a reasonableness standard, which requires reasonable

diligence to learn material facts that should be known.

California case law is very clear on particular matters concerning actual

knowledge. For example, liability for fraudulent concealment requires

actual knowledge. Constructive knowledge is insufficient. Assilzadeh

established a requirement of actual knowledge of the material fact for

liability to attach to non-disclosure.

Similarly, San Diego Hospice v.

County of San Diego held that actual knowledge of facts materially

affecting the value of the property was required for liability to attach for

non-disclosure.

This requirement was again affirmed and constructive

knowledge was deemed insufficient in Waters v. Professional Community

70. See MATHEWS & LANCASTER, supra note 63 (explaining there is only a duty to

disclose factual matters that bear upon the quality of the property that might be detrimental to

the value of the property).

71. Yu, supra note 5; Hino & Burke, supra note 10.

72. Intel Corp. Inv. Pol’y Comm. v. Sulyma, 140 S. Ct. 768, 778 (2020); see also

The Supreme Court Defines Actual Knowledge, NAT’L L. REV. (Feb. 26, 2020), https://

www.natlawreview.com/article/supreme-court-defines-actual-knowledge [https://perma.cc/

GV8S-JWSR].

73. Easton v. Strassburger, 152 Cal. App. 3d 90, 102 (1984).

74. Assilzadeh, 82 Cal. App. 4th at 410.

75. San Diego Hospice v. County of San Diego, 31 Cal. App. 4th 1048, 1055–57 (1995).

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Management of California, Inc.

However, under a negligence theory,

the reasonable care standard is used.

The Securities Exchange Commission (SEC) is another area of law that

vaguely defines climate related disclosures. For example, the SEC fails to

specify the level of knowledge required from disclosures related to climate

change science and fact. As climate science becomes more certain and

further integrated into the law (such as through SEC regulations requiring

disclosures) it may be argued that levels of knowledge below “actual

knowledge” are sufficient to attach liability in this area.

To begin the analysis of whether climate change research and science

provides the adequate level of knowledge, it must be determined whether

the climate science regarding a certain risk is strong enough to provide the

seller with actual knowledge of the risk. This will largely depend on the

level of certainty, or confidence and likelihood of the event, as determined

by IPCC standards or as determined by the California legislature or courts.

When certainty of an event is particularly high, the court would be more

likely to consider climate change risk sufficient to provide actual knowledge

that then must be disclosed. However, if the certainty of a risk is particularly

low, the climate science is likely not sufficient to provide a seller or her

agent with actual knowledge of the climate risk.

3. Reasonability Standard

The final issue to analyze is the standard of reasonability. Section

2079

and Assilzadeh

establish a sort of reasonable care standard. This

is an objective standard that considers whether someone acted with the

care that an average person would have taken in similar circumstances.

In the context of climate change risk disclosure, to create or avoid liability,

it will have to be argued that, with regard to IPCC levels of certainty, it

was or was not reasonable for the seller to have had knowledge of the

climate change risk to the residential property in question.

In determining whether a reasonable person would have taken care to

learn of the climate risks, certainty should be examined under the IPCC.

While subjective reasonability may hinge on political stance and ideological

viewpoints regarding the environment, reasonability is better assessed

through the lens of scientific certainty. The more certain a risk is, the more

76. Waters v. Prof’l Cmty. Mgmt. of Cal., 2020 Cal. Super. 6576 (2020).

77. See Easton, 152 Cal. App. 3d at 102.

78. CAL. CIV. CODE § 2079 (Deering, LEXIS through 2022 Sess.).

79. Assilzadeh, 82 Cal. App. 4th at 413.

80. Standard of Care, LEGAL INFORMATION INSTITUTE, CORNELL LAW SCHOOL,

https://www.law.cornell.edu/wex/standard_of_care [https://perma.cc/4E5Y-HLNX] (database

updated Sept. 2021).

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likely there is to be sufficient research and information for the seller to

learn of the risk upon reasonable diligence. When the climate change risk

is, for example, “virtually certain” to impact the region and thus impact

the residential property, it may be reasonable that the seller was able to

and should have learned of these risks. This certainty backed in science

ensures that a reasonable person (here, the reasonable seller) would know

or should know that climate change would affect the property regardless

of whether they subjectively believe or support the climate science from a

political or social perspective.

C. Comparing Residential Property Climate Disclosure Liability to

SEC Climate Disclosure Requirements

As climate change knowledge and research is becoming more widespread,

the integration of climate change into the law is spreading, thus potentially

opening new doors of legal comparison. One major example of climate

integration into the law is the Securities Exchange Commission’s (SEC)

recent series of climate change-related disclosure requirements. In 2010,

the SEC published interpretive guidance for public companies, detailing

how existing SEC disclosure requirements applied to matters of climate

change.

This guidance came after the SEC experienced mounting pressure

from state attorneys general, investors, environmentalists, and others seeking

clarification on disclosure recommendations regarding climate change.

The guidance stated that both direct and indirect consequences

regulation and legislation related to climate, business trends, and physical

effects of climate change could all have a material effect on business

operations.

The SEC stated that when the threshold of materiality is met,

81. Commission Guidance Regarding Disclosure Related to Climate Change, Securities

Act Release No. 33–9106, Exchange Act Release No. 34–61469, Release No. FR-82, 75

Fed. Reg. 25, 6290 (Feb. 8, 2010); Jennie Morawetz et al., The SEC’s Recent and

Planned Activity on Climate Change Disclosures: What Companies Can Do To Prepare,

KIRKLAND & ELLIS (Oct. 1, 2021), https://www.kirkland.com/publications/kirkland-

alert/2021/09/sec-climate-change-disclosures [https://perma.cc/Z8EX-7KQS].

82. Morawetz et al., supra note 81.

83. Indirect consequences are changes in legal, technological, political and scientific

changes that create new opportunities, risks, and demands which changes the climate impact of

a registrant. Direct consequences include climate impacts from the direct action that a

registrant is taking that creates climate degradation. Commission Guidance Regarding

Disclosure Related to Climate Change, Securities Act Release No. 33–9106, Exchange

Act Release No. 34–61469, Release No. FR-82, 75 Fed. Reg. 25, 6290 (Feb. 8, 2010).

84. Id.

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companies are required to make disclosures under Regulations S-K and

S-X.

Regulation S-K requires various material disclosures and lays out

reporting requirements for public companies completing SEC filings.

Regulation S-X outlines how companies should disclose financial statements

on registration statements, annual reports, and other filings.

If the SEC

were to impose affirmative new rules mandating disclosures, authority

would be granted under Sections 7, 10, and 13 of the Securities Exchange

Act.

While this guidance had a limited effect on climate-related disclosures

shortly after its issuance, dozens of comment letters, which are sent out

by the SEC for comment on a specific rule proposal or concept and then

filled out and submitted back to the SEC by companies, relating to their

climate disclosures have been sent during the Biden administration.

The

SEC posted a similar sample letter on its website in September of 2021,

which requested information on material climate change transition risks,

litigation risks, and physical risks with respect to the individual business.

While not specifically stated, the SEC’s guidance briefly discussed the

time frame of the climate event and its relevancy.

These disclosure guidelines

did not include a “specific future time period that must be considered in

assessing the impact of a known trend, event or uncertainty that is reasonably

likely to occur.”

However, the SEC goes on to say, “[t]he time horizon

of a known trend, event or uncertainty may be relevant to a registrant’s

assessment of the materiality of the matter and whether or not the impact

is reasonably likely.”

It should be noted that time horizons are included

in the assessment of materiality because of the levels of certainty in

foreseeability of imminence and the potentially long time horizons for

climate risks and weather events. Under this statement by the SEC, it

appears that the predicted speed at which sea level will rise as well as how

85. Id.

86. 17 C.F.R. § 229 (2021).

87. 17 C.F.R. § 210 (2021).

88. Securities Exchange Act of 1934 § 7, 15 U.S.C. § 78g; Securities Exchange Act

of 1934 § 10A, 15 U.S.C. § 78j-1; Securities Exchange Act of 1934 § 13, 15 U.S.C. 78m.

89. Morawetz et al., supra note 81.

90. Id.; see Sample Letter to Companies Regarding Climate Change Disclosures,

U.S. SEC. & EXCH. COMM’N (Sept. 22, 2021), https://www.sec.gov/corpfin/sample-letter-

climate-change-disclosures [https://perma.cc/78TP-JM4Z].

91. Commission Guidance Regarding Disclosure Related to Climate Change, Securities

Act Release No. 33–9106, Exchange Act Release No. 34–61469, Release No. FR-82, 75

Fed. Reg. 25, 6290 (Feb. 8, 2010).

92. Robert C. Kirsch, THE IMPACT OF ENVIRONMENTAL LAW ON REAL ESTATE

TRANSACTIONS: BROWNFIELDS AND BEYOND, VOLUME 2 (SS003 ALI-ABA 1789) (2010),

Lexis.

93. Id.

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quickly the risk of fire or flood will increase will play a part in determining

the materiality of these events. Furthermore, the SEC stated: “materiality

‘with respect to contingent or speculative information or events . . . “will

depend at any given time upon a balancing of both the indicated probability

that the event will occur and the anticipated magnitude of the event in

light of the totality of the company activity.”‘“

This highlights the

importance of scientific confidence and likelihood of the climate-related

risk.

The standard required for disclosure is that a known trend or uncertainty

is reasonably likely to have a material effect on financial condition or

operating performance.

Applying the IPCC likelihood levels of climate

risk to the SEC standard of reasonably likely, it is reasonable to assume

the equivalent IPCC level of certainty is “likely” (66-100%), because

reasonably likely is a lower threshold to meet

Under the IPCC “likely”

standard, sea level rise and increased flood risk would almost certainly

require disclosure by a company. However, with the lack of certainty from

the IPCC regarding likelihood of increased fire risk, the SEC disclosure

burden may not be met. Accordingly, a company may not be required to

disclose increased fire risk under SEC disclosure standards unless other

accepted sources, such as CAL FIRE, show California-specific fire risks

that are equal to or greater than “likely.”

The question of increased climate change related disclosures appears to

be at the forefront of the SEC. In May 2020, the SEC Investor Advisory

Committee approved recommendations that urged the Commission to begin

updating reporting requirements for issuers to include “material, decision-

useful, or ESG [environmental, social, and governance] factors.”

Then,

in December of 2020, “the ESG Subcommittee of the SEC Asset Management

Advisory Committee issued a preliminary recommendation that the

Commission require the adoption of standards by which corporate issuers

94. Commission Guidance Regarding Disclosure Related to Climate Change, Securities

Act Release No. 33–9106, Exchange Act Release No. 34–61469, Release No. FR-82, 75

Fed. Reg. 25, 6290 (Feb. 8, 2010) (quoting Basic Inc. v. Levinson, 485 U.S. 224, 238 (1988)).

95. Commission Statement About Management’s Discussion and Analysis, Release

No. 33-8056, 67 Fed. Reg. 3746 (Jan. 22, 2002).

96. IPCC Report, supra note 1, at 4.

97. Recommendation from the Investor-as-Owner Subcommittee of the SEC Investor

Advisory Committee Relating to ESG Disclosure 7 (May 14, 2020), https://www.sec.gov/

spotlight/investor-advisory-committee-2012/recommendation-of-the-investor-as-owner-

subcommittee-on-esg-disclosure.pdf [https://perma.cc/463A-QX5C].

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276

disclose material ESG risks.”

In March of 2021, Acting Chair of the

SEC, Allison Herren Lee, called for an evaluation of SEC disclosure rules

with an “eye towards facilitating the disclosure of consistent, comparable,

and reliable information on climate change.”

On September 14, 2021,

SEC Chair Gary Gensler stated in testimony before a Senate Committee

that SEC staff are preparing a climate change disclosure rule proposal

likely to be finalized in 2022.

100

On March 21, 2022, the SEC released a long-anticipated proposed rule

for climate change disclosures.

101

The proposed rule would require “a

registrant to disclose certain climate-related information, including information

about its climate-related risks that are reasonably likely to have material

impacts on its business.” Touching on materiality, the proposed rule

102

states, “the materiality determination is largely fact specific and one that

requires both quantitative and qualitative considerations . . . . [W]hen assessing

the materiality of a particular risk, management should consider its magnitude

and probability over the short, medium, and long term.”

103

The proposed

rule purposely does not define “short,” “medium,” and “long” to provide

more flexibility to businesses.

104

The proposed rule clarifies which climate

risks are included, and distinguishes between acute risks, such as floods,

and chronic risks, such as sea level rise and increased wildfires.

105

While

the proposed rule fails to define “reasonably likely,” the SEC specifically

stated that companies could rely on scientifically-based, widely accepted,

and publicly available climate-related scenarios, such as those from the

IPCC.

106

The SEC’s proposed rule and recent action demonstrate the trend towards

climate change risk information becoming common knowledge under the

law, as well as the importance of reliance on scientific climate data (such

as that from the IPCC) to establish certainty.

107

The disclosure requirements

98. Public Statement, Allison Herron Lee, Commissioner, Sec. & Exch. Comm’n,

Public Input Welcomed on Climate Change Disclosures (Mar. 15, 2022), https://www.sec.

gov/news/public-statement/lee-climate-change-disclosures#_ftn4 [https://perma.cc/Q5MW-

LT5L].

99. Id.

100. Morawetz et al., supra note 81.

101. The Enhancement and Standardization of Climate-Related Disclosures for

Investors, 87 Fed. Reg. 21134 (proposed Mar. 21, 2022) (to be codified at 17 C.F.R. pts.

210, 229, 239, 249), https://www.sec.gov/rules/proposed/2022/33-11042.pdf [https://perma.cc/

58AL-UC9F].

102. Id.

103. Id.

104. Id.

105. Id.

106. Id.

107. See id.

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and assessment of materiality by the SEC can be used as a model for

expanding the law, potentially in the area of real estate transaction

disclosures.

IV. TESTING EXPANSION OF DISCLOSURE REQUIREMENTS WITH

HYPOTHETICALS

The application of the expansion of common law can be better understood

through hypothetical situations pertaining to specific climate change-related

risks. The three risks discussed here include: (a) sea level rise, (b) increased

flooding, and (c) increased fire risk.

The main climate change related risks concerning California discussed

in this paper include sea level rise, increased flooding, and increased fire

risk. Under the IPCC confidence levels, sea level rise and increased flooding

are “high” confidence events, while increased fire risk is “medium” to

“high” confidence.

108

The IPCC classifies sea level rise as “very likely”

to “virtually certain,” and increased flooding as “very likely” to occur.

109

Certainty of increased fire risk is not discussed by the IPCC report.

110

The

following sections will examine uncertainties in the law as it pertains to

the three major climate change related risks discussed in this paper.

A. Sea Level Rise

The first hypothetical this Article will analyze involves sea level rise

impacting a residential property for sale, such as a house located on the

beach next to the Pacific Ocean. To determine liability for disclosure of

the climate change risk, the level of certainty of risk must be assessed and

then applied to the current legal framework. Under the IPCC model, sea

level rise is “very likely” to “virtually certain” to occur, and its confidence

level is “high.”

111

In this hypothetical, the risk of sea level rise is a factual matter because

the climate risk is “very likely” (90–100% probability) to “virtually certain”

(99–100% probability) with a “high” confidence level.

112

Sea level rise

impacts the physical property, the quality of the property, and market

108. IPCC Report, supra note 1, at 5, 9, 19, 24–25.

109. Id. at 25.

110. Id.

111. IPCC Report, supra note 1, at 21.

112. Id.

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value by potentially destroying the property or decreasing its size depending

on how the raised water line is treated under state law.

113

Measuring the

decrease in market value requires predicting how much land is calculated

to be lost.

114

The time frame in which the property size will be decreased

makes the question of measurability more difficult, as sea level rise can

be gradual and/or sudden.

115

One attempting to create disclosure liability

will argue for the use of quantitative science regarding sea level rise for

that particular area. Alternatively, those trying to avoid liability will argue

that the sudden versus prolonged potential timelines for sea level rise makes

the risk too difficult to quantify.

The likelihood and confidence of sea level rise under the IPCC makes

this climate event almost certainly factual knowledge that, when known,

can constitute actual knowledge of the risk to the property. With this high

certainty, taking reasonable care would likely reveal this climate risk.

Additionally, under the SEC framework discussed above, sea level rise

would very likely be a required disclosure.

Sea level rise presents the strongest case for extending liability because

of the likelihood and confidence of its climate risk, along with its direct

impact to residential property. If a seller or her agent were to fail to disclose

the risk of sea level rise to a residential real estate buyer and damage occurs,

there is a strong argument for liability for failure to disclose this climate

risk. To prevent this liability, the seller, broker, or developer should inform

the buyer of the potential risk of sea level rise.

B. Increased Flooding

The second hypothetical evaluates the disclosure of increased flooding

risk. For this hypothetical, there is a residential property being sold that is

subject to increased flood risk. Similar to the previous section’s hypothetical

on sea level rise, analysis begins by looking to the confidence and likelihood

of that risk under the IPCC’s standards.

116

The likelihood of increased

flooding is “very likely” (90–100% probability), and the confidence of

this event is “high.”

117

113. Tim Duane, MCLE Self Study Article: Climate Disruption and Sea Level Rise:

Legal Issues for Coastal Land Use in California, 35 CAL. REAL PROP. J. & PUB. L.J. JOINT ISSUE

12, 15 (2018).

114. See id.

115. Id. at 14.

116. IPCC Report, supra note 1, at 4 n.4.

117. Id. at 19.

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In assessing materiality, increased flood risk appears to impact what the

market value of the property should be.

118

It seems the level of increase in

flooding should be considered in conjunction with the overall rates of

flooding to be expected. For example, if the existing or historic risk of

flooding begins at a very low level, an increase in flooding may still be at

a low enough level for it to not constitute a material difference to the value

of the property. It appears that the exact increase in flooding, if quantifiable,

would need to be substantial enough to objectively meet the required

standard of certainty.

It seems the main issue in analyzing the liability of failure to disclose

flood risk is measurability of the market impact. While increase in flood

risk should be analyzed objectively, it also seems that how the surrounding

infrastructure handles an increase in flooding and how the increased

flooding impacts the property in question should be considered.

119

Increased

risk of flooding is calculated by percent increase in risk, unlike sea level

rise which is measured in the more quantifiable metric of inches.

120

This

form of risk measurement will create a problem in determining liability

for non-disclosure of increased flood risk.

It appears another concern for the quantifiability of increased flood risk

is how to compare the levels of increase in flood risk in different areas.

For example, areas that experience high flooding may only gain a small

increase in flood level over time and still maintain a higher overall flood

rate while having a small percent change in flood increase. In contrast, an

area that typically experiences very little flood risk might gain a larger

percent increase in flooding while still having an objectively lower level

of flood risk. To combat this issue, the flood increase should be expressed

as a percentage increase, rather than a measurement of increased inches

of rain or a multiplying factor.

The likelihood and confidence of increased flood risk under the IPCC

almost certainly makes this climate event knowledge that, when known,

will constitute actual knowledge of the risk to the property. Due to the

118. Tammy Leonard & Lei Zhang, Flood Hazards Impact on Neighborhood House

Prices, J. REAL ESTATE FIN. ECON., Aug. 2018, https://news.unt.edu/sites/default/files/

082018_summaryleonard_floodhousingvalueimpact_leonard_mb_final.pdf [https://perma.cc/

LFY3-MVMW]; Hino & Burke, supra note 10.

119. See Kuta, supra note 15.

120. Melissa Denchak, Flooding and Climate Change: Everything You Need to

Know, NRDC, Apr. 10, 2019, https://www.nrdc.org/stories/flooding-and-climate-

change-everything- you-need-know [https://perma.cc/VL8F-XPCV].

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280

certainty of an increase in flooding, reasonable care would very likely

reveal this risk. Under the SEC framework, this would likely be a required

disclosure.

While attaching liability in this hypothetical may be possible, including

a quantifiable method of calculating the increased risk of damage from

flooding would be required. If this were possible, creating liability is

certainly attainable.

C. Increased Fire Risk

The final hypothetical is an analysis of increased fire risk. In a situation

where a residential property being sold is subject to increased fire risk,

analysis begins by looking to the IPCC levels of confidence and likelihood.

The confidence level of increased fire risk is “high” confidence, however,

the IPCC does not provide a likelihood for this climate change risk.

121

This

risk differs from the other climate risks discussed as the missing IPCC

likelihood factor frustrates the materiality analysis, specifically the question

of whether the risk is actual knowledge, as there is no longer a quantifiable

and objective level of certainty of risk as determined by the IPCC. Also,

like increased flood risk, the increased fire risk’s impact on market value

will be difficult to measure and quantify as a calculable impact on market

value, but similar studies suggest that fire risk can impact quality and

market value of property,

122

unless Cal Fire hazard severity zones aid in

this analysis. While research shows the quality and market value of the

homes in increased risk areas should decrease, the dollar value does not

always follow science due to extrinsic factors.

123

The level of increase in

risk should be considered in conjunction with the overall level of risk.

With the lack of an IPCC likelihood level and a calculable market value

impact, increased fire risk poses the weakest case for attaching liability.

These drawbacks may, however, be compensated for by using the increased

data on California wildfire intensity, which demonstrates that the top ten

most intense fires in California history have all occurred in the past twenty

years.

124

Data presents strong evidence of an increase in the number of

121. Id. at 26.

122. See Julie Mueller et al., Do Repeated Wildfires Change Homebuyers’ Demand

for Homes in a High-Risk Area? A Hedonic Analysis of the Short and Long-Term Effects

of Repeated Wildfires on House Prices in Southern California, J. REAL ESTATE FINANCE

ECON. 155–72 (Feb. 2009), https://link.springer.com/content/pdf/10.1007/s11146-007-

9083-1.pdf [https://perma.cc/8F6Q-9XZP].

123. Id.

124. Rosmery Izaguirre, Worst Fires in California History: Dixie, Camp and More,

LA TIMES (Aug. 24, 2021, 10:55 PM), https://www.latimes.com/california/story/2021-08-

24/worst-fires-in-california-history-dixie-camp-and-more [https://perma.cc/QL75-F946].

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extreme fire events per year,

125

which may not only overcome the lack of

IPCC data, but could also provide quantifiable data of an increase in

fire risk necessary to establish this risk as a material fact.

Additionally, California law requires disclosure of property located in

a very high fire hazard severity zone. This can be differentiated from

increased fire risk by the time frame of reference—present time for current

disclosure requirements versus future fire risk as discussed in this hypothetical.

In creating the fire hazard zone maps, Cal Fire considers many factors

including: “fire history, existing and potential fuel (natural vegetation),

predicted flame length, blowing embers, terrain, and typical fire weather

for the area.”

126

While Cal Fire considers the “potential fuel” of an area in

creating its maps, climate change risk is not stated as a consideration.

127

In addition, the “potential fuel” consideration is vague enough to make

the entirety of the future fire risk consideration uncertain. Cal Fire uses

strict in/out of fire risk boundaries for disclosure purposes,

128

but the

integration of climate science could change these boundaries or make the

in/out of fire risk distinction less clear cut.

D. The Overarching Issues of Time and Knowledge of Buyer

Two overarching issues exist within the analyses of the above climate

issues and of climate change risk disclosure: (1) the timing of the risk and

(2) whether the buyer has knowledge of the risk.

While the climate risk itself and the certainty of that risk are quantified

by the IPCC, the IPCC does not provide a specific time frame for these

events. Climate change risks, such as sea level rise, are at times long-term

risks that do not immediately and severely impact most residential real

estate.

129

The potentially long-term and uncertain time frame of climate

125. Raymond Zhong, Climate Scientists Warn of a ‘Global Wildfire, N.Y. TIMES

(Feb. 23, 2022), https://www.nytimes.com/2022/02/23/climate/climate-change-un-wildfire-

report.html [https://perma.cc/84TJ-HM9B]; see Top 20 Largest California Fires, CAL

FIRE (Jan. 13, 2022), https://www.fire.ca.gov/media/4jandlhh/top20_acres.pdf [https://perma.cc/

9YYF-DJBL].

126. Fire Hazard Severity Zones, CA.GOV, https://osfm.fire.ca.gov/divisions/wildfire-

planning-engineering/wildfire-prevention-engineering/fire-hazard-severity-zones/ [https://

perma.cc/5QAN-S8AC] (Sept. 21, 2022).

127. See id.

128. Id.

129. Tim Duane, MCLE Self Study Article: Climate Disruption and Sea Level Rise:

Legal Issues for Coastal Land Use in California, 35 CAL. REAL PROP. J. & PUB. L.J. JOINT

ISSUE 12 (2018).

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risk makes it crucial for states creating residential real estate climate change

risk disclosure legislation to include a deadline or statute of limitations for

claiming nondisclosure of the risk. If no statute of limitations is established,

every beachfront property owner will eventually have a claim against sellers

and their agents because of the inevitability of climate change.

While the seller has a duty to disclose if they have actual knowledge,

Lingsch specifies that this is required when there are facts materially

affecting the value or desirability of the property “not known to, or within

the reach of the diligent attention and observation of the buyer.”

130

While

the IPCC certainty of climate change risk creates the ability to make climate

change a material fact that can constitute actual knowledge, this certainty

might contradict Lingsch if these scientific facts are readily “within the

reach of the diligent attention and observation of the buyer.”

131

When the

climate science behind a climate risk is 90-100% certain, for example, the

buyer would likely know about this risk to their property and investment

due to news coverage or local outreach. A key question remains as to how

heavily the notion of caveat emptor weighs on climate change disclosure

for buyers. Should the buyer be responsible for researching climate risk?

Or should the seller be required to disclose known climate risks?

From an economic perspective, the seller and her agents are typically in

a better position to gather market information than the buyer. In terms of

economic efficiency, it makes sense to place the burden of information

gathering on the seller and her agents, as the seller is the current owner

and has a greater chance of being familiar with that specific land. Moreover,

a person selling a home need only perform this research once, whereas

placing this burden on the buyer would require them to perform this

research on every potential home. An additional consideration in placing

the information burden is the political consideration surrounding climate

change. While scientific consensus is growing regarding the certainty of

climate change and related risks, there remains disagreement about the

validity of climate change science in the socio-political sphere.

132

Because

climate change is heavily politicized—with some political groups refusing

to recognize climate change entirely—there may be a lack of buyer research

if the burden of information gathering is placed on the buyer. Individuals

who do not believe in climate change, for whatever reason, may be less

likely to research climate change impacts on their prospective purchase,

130. Lingsch v. Savage, 213 Cal. App. 2d 729, 735.

131. Id.

132. Bo MacInnis & Jon A. Krosnick, Climate Insights 2020: Surveying American

Public Opinion on Climate Change and the Environment, RES. FOR THE FUTURE (2020),

https://media.rff.org/documents/Climate_Insights_2020_Partisan_Divide.pdf [https://perma.cc/

W8FK-DC45].

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regardless of the scientific certainty. For example, a 2022 study showed

that houses exposed to sea level rise are increasingly Republicans.

133

However,

even buyers who are concerned about the threats of climate change may

not consider how these risks threaten their new home purchase. Many of

the climate threats that impact a home are not as apparent as, for example,

sea level rise. As a result, purchasers of a new home may not prioritize

research on less-observable risks, such as increased flood or fire risks.

V. CONCLUSION

The potential for liability for non-disclosure of climate change-related

risks exists in California. However, the likelihood of this claim prevailing

depends on the ability to measure the decrease in market value that the

risk creates, the confidence, and the likelihood of the risk. While these

measurements may be possible for some climate change risks (i.e., sea

level rise), it may not be possible for others (i.e., increased wildfire risk).

134

An IPCC-type framework for disclosure requirements would strengthen

the current common law framework. However, with early codification of

the California common law regime, expansion without legislation may

prove difficult.

The easiest way to create liability for disclosing climate risks is to pass

legislation that unambiguously defines “material fact” to include specific

climate change risks as Hawaii has done.

135

The easiest way to avoid

liability for lack of disclosure for sellers is to disclose these risks to buyers.

With recent expansion of climate change disclosure in SEC regulations, it

is advisable for sellers and their agents to treat climate science (such as

the IPCC report)

136

as information that must be disclosed to buyers to avoid

lawsuits.

Areas for future research and exploration include the applicability of

this analysis to the buying and selling of commercial property. While the

statutory framework for residential real estate is different for commercial

real estate, the same analysis could apply. However, it should be studied

further, as there are differences between residential and commercial property,

133. Asaf Bernstein et al., Partisan Residential Sorting on Climate Change Risk,

146 J. OF FIN, ECON. 989–1015 (Apr. 2022), https://doi.org/10.1016/j.jfineco.2022.03.004

[https://perma.cc/J28R-PCS9].

134. See IPCC Report, supra note 1.

135. S.B. 474, 31st Leg., Reg. Sess. (Haw. 2021).

136. IPCC Report, supra note 1.

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such as leasing versus buying and the difference in risk to locations of

residential versus more commercial areas.

To ensure clarity regarding the duty of disclosure as climate science

becomes more certain and climate risks become more likely, it would be

beneficial for states such as California to pass legislation like that of

Hawaii,

137

while including further definitions of “material fact.” The more

climate risk is defined as material or not in statutory law, the clearer the

duty of disclosure will be for sellers and their agents. Without a clear

definition of “material fact” and with the increase in certainty of climate

science, whether climate risk requires disclosure is sure to create many

legal and political problems as the amount of litigation in this realm rises

like the sea level.

137. S.B. 474, 31st Leg., Reg. Sess. (Haw. 2021).