Florida Court Extends Mandatory Disclosure Rules

In Florida, failing to disclose known defects in the sale of real property can have serious repercussions, including contract rescission and the payment of money damages. A recent Florida court decision extended disclosure requirements to transactions made where the buyer agree to purchase the property “as is.”

Mandatory Disclosure

In Florida, sellers must disclose any factors or conditions about the property that have a substantial impact on its value and that cannot be easily discovered by the buyer.

The Florida Association of Realtors has compiled a list of common characteristics that sellers should disclose to buyers, which includes:

• Past or present sinkholes;

• Environmental hazards, like asbestos, lead, mold, etc.

• Infestations or damage from termites or carpenter ants; and

• Problems with essential components of the home, like plumbing, electrical wiring, HVAC, major appliances, etc.

Actual Knowledge

Sellers will only be held responsible for disclosing property defects of which they have actual knowledge. If a buyer claims that a seller did not properly disclose the condition of the property, the buyer must show that:

• The seller knew about the property defect;
• The defect has a substantial impact on the value of the property;
• The buyer did not, upon purchase, know about the defect;
• The defect would not have been easy for the buyer to detect; and
• The seller did not tell the buyer about the defect.

Bowman v. Barker

In Barker v. Bowman, after purchasing a home from Barker, Bowman discovered the existence of multiple undisclosed and unresolved defects. He subsequently alleged that Barker failed to disclose known defects in the house and fraudulently misrepresented its condition, both of which constituted breaches of his duty as a seller. Barker disagreed, arguing that an affidavit he signed prior to the sale, denying awareness of any defects in the property, constituted a negation of the knowledge element required for a charge of a failure to disclose. A trial court agreed with Barker, and ruled for the sellers.

On review, the court stated that the existence of the sellers’ affidavits actually highlighted the fact that there were genuine issues of material defects in the case. This, combined with evidence that the sellers had probable knowledge of the defects which conflicted with the affidavit, led the court to rule that summary judgment in such cases is inappropriate. Essentially, just because the house was sold “as is” does not mean that the seller no longer has the duty to disclose known defects.

Damages

If a buyer suffers loss because a seller fails to disclose defects, the buyer’s damages are measured by either the diminution in the fair value of the property or the cost of restoration to the property’s state before the defect.

Restoration damages are generally limited to the value of the property in its original condition. However, this is not the case when the cost of restoration:

• Exceeds the value of the property in its original condition;

• Results in a depreciation in the value of the property;

• Is more than the cost of the actual damage sustained; or

• Is impractical.

In transactions involving the transfer of real estate, it can often be difficult to know what conditions must be disclosed to the buyer. An experienced real estate attorney can advise you on this as well as other complicated aspects of property sales. If you are considering purchasing or selling a property, please contact the real estate attorney at the Law Offices of Larry E. Bray in West Palm Beach for a free consultation.