Lawsuits regarding nondisclosure of a home’s problems are becoming more prevalent. Historically, the rule of “caveat emptor” or “buyer beware” was the prevailing standard in residential transactions. However, the law has evolved and Florida now requires sellers of residential property to make certain disclosures to buyers about the property’s condition and history. An increasing number of sellers and sometimes their real estate agents are finding themselves on the hook for nondisclosure. Therefore, it is important for both home sellers and real estate agents to be familiar with the disclosures required.
Florida law provides that, with some exceptions, a home seller must disclose any facts or conditions about the property that have a substantial impact on its value or desirability, and that are not easily observable to a buyer. This has been the standard since the Florida Supreme Court decided the case of Johnson v. Davis, 480 So.2d 625 in 1985.
Although not required by Florida law, it is well advised that property disclosures be made in writing together with proof of delivery to the buyer. Although some required disclosures are included in the prevailing residential real estate contract forms, disclosures relating to the specific property are normally made by separate disclosure form. Types of issues or property conditions required to be disclosed include:
- whether improvements have been made without building permits;
- whether the property contains any environmental hazards such as asbestos, lead, mold, Chinese drywall;
- whether any infestations or damage have occurred from wood-destroying organisms such as termites and carpenter ants;
- whether there are any problems with essential components of the home, such as the roof, plumbing, electrical wiring, major appliances, HVAC;
- whether any actual or potential claims, complaints or court proceedings affect the property;
- whether the property is subject to the rules of a condominium or condominium association; and,
- whether any disputes have arisen regarding the property’s boundaries.
The good news for sellers in Florida, home sellers are not responsible for defects they “should have known” about. Rather, Florida sellers are required to disclose only those property defects of which they have actual knowledge. This standard was determined in the case of Jensen v. Bailey, 76 So.3d 980 (Fla. 2nd DCA 2011). In this case, the Court recognized that sellers should not be expected to guarantee to buyers that their properties are free of all defects. Instead, to make a claim against a seller, the buyer must be able to demonstrate that:
- the seller knew about the property defect;
- the defect has a substantial impact on the value of the property;
- the buyer did not know about the defect at the time of purchase;
- the defect was not readily observable or easy for the buyer to detect; and,
- the seller did not disclose the defect to the buyer.
It is important to note that selling a home in “As-Is” condition, does not relieve a seller from the disclosure duties under Florida law. The “As Is” condition means only that the buyer agrees to take the property in its existing condition without the seller having to make any repairs.
Bottom line: Sellers are well advised to carefully review their property disclosures to any prospective purchaser. A little extra caution at this stage of any potential transaction can limit a seller’s liability exposure and help avoid a lawsuit post closing.