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Designated Flood Zones May Cause Additional Problems When Purchasing Real Estate in Massachusetts

In a recent Massachusetts case, Witkowski v. Endlar Ins. Agency & First American Title Ins. Co., the judge reversed a previous summary judgment decision for Endlar regarding a certificate of insurance for the plaintiff’s condominium unit.

Plaintiff, Witkowski, purchased a basement unit of a residential condominium in Andover, MA. The condominium is located in a floodplain area designated by the Federal Emergency Management Agency (FEMA) as an area of special flood hazard. Federal law, 42 U.S.C. § 4012a(b)(1) (2006), states that any lending officer or agency shall not approve any financial assistance for acquisition or construction purposes in any area that has been deemed as having special flood hazards, unless the building is covered by flood insurance.

Witkowski discovered that the building was located in a special flood hazard area and that in order to obtain a mortgage he would need to provide proof of flood insurance for the unit as a condition of closing. Endlar provided a certificate including the plaintiff’s name and unit number, as well as the two flood insurance policies in the amounts of $2.5 million and $9.8 million, with a signature confirming the information.

The condominium was damaged by a flood and plaintiff’s unit was completely destroyed. The condominium association told the basement owners that their units were excluded from coverage because of their location, and plaintiff’s unit cannot be rebuilt. Plaintiff is now trying to recover from Endlar for falsely representing the flood insurance coverage of his unit. The case has been remanded to the Massachusetts Superior Court who will further rule on this issue, but it is likely that plaintiff will be able to recover based on the evidence presented and the signed certificate by Endlar ensuring flood insurance.

The certificate was requested for the express purpose of confirming insurance for that specific unit, it was sent as a direct response to the request for verification, there were eighty six residential units and only the four basement units were not covered by the flood insurance and the certificate provided no indication or warning that the plaintiff’s unit was excluded from coverage.

There are many steps and documents required for real estate closings. First, the agreement must be in writing to satisfy the Statute of Frauds, which simply means that certain contracts must be in writing. There must be an offer to purchase followed by the Purchase and Sales Agreement. There are many types of information and documentation required at a closing, the most common are:

• Loan Information for Existing Mortgages and Liens
• Payoffs Other than Mortgage
• Termite Letter
• Survey
• Flood Insurance
• Hazard Insurance
• Septic Letter
• Well Letter
• Homebuyer’s Warranty
• Power of Attorney
• Conditions of Closing
• Cashier’ Check/ Wire Transfer
• HUD Settlement Statement (prepared by title company)

If you are looking to purchase or sell real estate, feel free to contact Pulgini & Norton, LLP at (781) 843-2200 or (888) 344-2046, or email us with any questions you may have. Our attorneys offer nearly 40 years of combined legal experience and provide thorough, timely, and results-driven service in many aspects of both residential and commercial real estate.

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