Who Pays for the NHD Report in California?
A clear breakdown of payment responsibility for Natural Hazard Disclosure reports in California real estate transactions — and why the answer is not always what your clients expect.
The Short Answer
In California real estate transactions, the seller typically pays for the Natural Hazard Disclosure (NHD) report as a matter of custom and practice. This aligns with the seller’s broader obligation under California Civil Code §1103 to disclose known natural hazards to prospective buyers.
However — and this is critical — payment is negotiable. The Residential Purchase Agreement (RPA-CA) allows parties to specify who bears the cost of disclosures, and agents should never assume the seller automatically pays without checking the contract terms.
Why the Seller Usually Pays
- Statutory obligation: The seller is legally required to provide NHD disclosures. Since the report satisfies this duty, the cost is conventionally treated as a seller expense.
- Escrow custom: Most escrow officers debit the seller's side of the closing statement for NHD report fees, along with other seller-paid disclosure costs.
- Buyer protection: Buyers benefit from an independent, third-party disclosure. Shifting the cost to the buyer can create the appearance of a conflict of interest.
When the Buyer Might Pay
There are legitimate scenarios where the buyer assumes the NHD report cost:
- Short sales and distressed sales: The seller may lack funds to cover disclosure costs, and the buyer agrees to pay to keep the transaction moving.
- Investor transactions: Experienced investors sometimes prefer to control the disclosure process and select their own NHD provider.
- Contractual agreement: Paragraph 7 of the CAR Residential Purchase Agreement allows the parties to allocate disclosure costs by mutual agreement.
- Relisting scenarios: If a previous disclosure exists but has expired or is contested, the buyer may agree to pay for a fresh report.
What Agents Should Document
Disputes over NHD payment most often arise when assumptions replace written agreements. Protect your clients (and your license) by confirming:
- Which party is named as the ordering party on the NHD invoice?
- Is the cost itemized on the closing statement as a buyer or seller debit?
- If escrow is paying at close, has the escrow officer confirmed the allocation?
- Did you obtain the buyer's written consent before ordering an NHD report they may be asked to pay for?
Bottom Line
The seller pays for the NHD report in the vast majority of California transactions — but only by custom, not by law. Payment is negotiable, and the purchase agreement controls. Agents should confirm the allocation in writing before ordering, and escrow officers should clearly debit the correct side of the closing statement.