Ellen Morrison Townsend: The rivers are down. Now the legal problems begin.

The floodwaters are receding in Indianapolis. Floodgates are reopening, roads are clearing, and homeowners and businesses are putting their minds to the difficult work of figuring out what was damaged and what happens next. From a real estate lawyer’s perspective, some of the problems are just beginning.

A major flood affects much more than a building’s physical condition. It can affect sales contracts, leases, insurance, mortgages, property values, drainage rights and even whether a damaged building can be reconstructed as it existed before. Some of these issues will arise immediately. Others may not surface until the property is sold years from now.

Consider a house that went under contract shortly before the flood. The seller completed the disclosure form, the buyer obtained an inspection, and everyone was preparing to close when water entered the basement. That transaction cannot simply proceed based upon information that was accurate before the flood. We must address the property’s changed condition before closing.

Indiana’s Residential Real Estate Sales Disclosure requirements become particularly important in that situation. The Indiana Real Estate Commission adopted an updated Seller’s Residential Real Estate Sales Disclosure Form, State Form 46234 (R9/2-26), earlier this year. The disclosure requirements address known physical conditions of the property, including flood-related conditions, and Indiana law also addresses what happens when the property’s condition materially changes after the disclosure is provided. For a property affected by this month’s flooding, what happened after the water receded — and how those involved documented the damage and repairs — may ultimately be as important as the fact that the property flooded.

That documentation will matter years from now when affected properties return to the market. Future buyers may want to know not only whether a property is located in a designated floodplain but whether it actually flooded in August 2026, how much water entered the property, and what was done afterward. Photographs, remediation records, repair invoices and written communications may become very important when memories are less clear several years later.

Real estate professionals should also avoid becoming amateur hydrologists or insurance experts. There is a significant difference between telling a buyer that a lender does not require flood insurance and telling a buyer that flood insurance is unnecessary. Likewise, a levee can substantially reduce flood risk, but that does not mean a property cannot flood.

Problems also remain after the water recedes. Wet building materials can develop mold quickly, and floodwater can carry sewage, chemicals, petroleum products, bacteria, and other contaminants. For landlords, significant water intrusion can create maintenance and habitability issues. For commercial and industrial properties, contaminated floodwater can turn a casualty loss into an environmental problem. What happens during the first days of cleanup may matter long after the property looks dry again.

Indiana also has a little-known statute dealing specifically with flood risk in leases. Indiana Code § 32-31-1-21 applies to residential, agricultural and commercial property. It requires a landlord to make a floodplain disclosure in the rental agreement when the structure’s lowest floor, including a basement, is at or below the 100-year flood elevation as determined under the statute. After what Indianapolis just experienced, some landlords and tenants may be reading that provision — and their leases — for the first time.

Then come the repairs. Major disasters create an immediate demand for contractors, and property owners understandably want their homes restored and businesses reopened as quickly as possible. That urgency can lead to rushed agreements and inadequate documentation.

Indiana’s mechanic’s lien laws make this particularly important. Depending on the circumstances, unpaid contractors, subcontractors and material suppliers can acquire lien rights against the real estate. An owner can pay the general contractor and later discover that the contractor failed to pay someone further down the chain. Written contracts, sensible payment schedules and appropriate lien waivers remain important even when everyone is in a hurry.

Property owners with mortgages should remember that the insurance company may not be the only entity interested in the insurance proceeds. Mortgage documents commonly address casualty damage, restoration and insurance proceeds. A significant insurance check may be payable jointly to the owner and lender, and the lender may have rights concerning how the money is used to restore its collateral.

Commercial landlords and tenants face another set of questions. Who repairs the building? Who pays for damaged tenant improvements? Does the tenant still owe rent while unable to occupy the premises? Can either party terminate if restoration takes too long? Those answers frequently depend less on what seems fair after the flood than on what the parties agreed to in the lease years earlier.

The flooding also raises a larger question about how we have developed land in Indiana. Wetlands have been drained, agricultural land tiled, streams altered, floodplains developed and enormous areas converted to impervious surfaces. Those choices affect where stormwater goes and how quickly it gets there. When more severe rain events meet decades of development and drainage decisions, the resulting legal problems extend far beyond the insurance claim.

Some of the more interesting real estate disputes may arise when property owners try to prevent the next flood. An owner whose property flooded understandably may want to build a berm, install pumps, regrade the property, or redirect drainage. The problem is that the water has to go somewhere. If one owner’s solution sends additional water onto another owner’s property, the original flood may eventually produce a dispute involving drainage rights, easements, nuisance or trespass.

The same issue exists on a larger scale. Indianapolis and other governmental entities will undoubtedly study what worked, what did not, and whether additional flood-control improvements are necessary. New floodwalls, drainage facilities, pumping capacity or other flood-control projects can require easements or private property and potentially raise compensation and eminent-domain issues.

Owners also should not assume a badly damaged building can be rebuilt exactly as it was. Depending upon the location and extent of the damage, floodplain and floodway regulations, building codes, zoning requirements and substantial-damage rules may affect reconstruction. The economic cost of a flood can therefore extend beyond replacing what the water physically destroyed.

Properties may even face consequences without ever taking water. A house can remain completely dry while the street floods, neighboring properties are evacuated, and photographs of the neighborhood underwater circulate on the internet. Whether that history eventually affects market value, insurance costs, lending decisions or property-tax assessments may take years to determine.

Finally, the phrase “100-year flood” is easy to misunderstand. It does not mean that once a major flood occurs, another one will not happen for a century. It describes probability, not a schedule. Historical experience does not guarantee future conditions, particularly as central Indiana continues to develop and extreme precipitation becomes an increasingly important consideration in infrastructure and flood planning.

Some of the legal consequences of the August 2026 flood are obvious today. Others will emerge as insurance claims are adjusted, leases are interpreted, contractors go unpaid, drainage is redirected, damaged buildings are reconstructed, and these properties eventually return to the market.

The water will go down, and the photographs will eventually disappear from the news. The legal history of the August 2026 Indianapolis flood is just beginning.•

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Townsend is a partner at Due Doyle Fanning & Alderfer LLP.