Seller Disclosure Requirements for Real Estate Sales in Florida
By Jessica Coroneos Law Clerk
Generally speaking, a home is the biggest purchase most Americans will make in their lifetime. Given the significance of this purchase, the condition of the property is of the utmost importance to buyers. For this reason, sellers and their respective agents are required to make a number of disclosures to a prospective buyer of real property under both state and federal laws.
The Florida Association of Realtor’s has an available disclosure form which simplifies the process of making the necessary disclosures and covers property conditions such as:
- Structural soundness, systems and appliances;
- Wood destroying organisms such as termites and other pests;
- Water intrusion, drainage issues and flooding;
- Roofing and related items such as the fascia and soffits;
- Pools, hot tubs, and spas;
- Homeowners’ or Condominium Association Restrictions;
- Environmental hazards including, but not limited to, lead-based paint, asbestos, mold, defective drywall, and chemical storage;
- Governmental claims against the property and/ or pending litigation; and
- Whether or not the Seller is subject to FIRPTA withholding.
While this form provides an immense amount of information and in some cases may satisfy both state and federal disclosure requirements, sellers should be aware that this document is intended to serve as a guideline and it is possible for there to be material issues affecting their property that are not specifically set forth on the form which will nonetheless require disclosure.
Also noteworthy is the fact that sellers in Florida are not required by law to complete and deliver this document to a potential buyer. Some sellers, such as investors or individuals who have inherited a property, have a tendency to strike through the entire form and write something along the lines of “seller has never occupied the property.” Regardless of whether or not a seller has resided at the property, choosing not to complete this document (or completing it in such a way that provides no useful information to a buyer) will not absolve a seller or his agent of the duty to disclose certain facts related to the condition of the property.
For example, a landlord may be aware that a tenant has made certain repairs to the property or an heir may come across a recent invoice for a roof replacement. In both of these situations, the seller will be deemed to be on notice of a material defect and will be required to disclose it despite never having occupied the property.
A Shift From the Doctrine of Caveat Emptor to Requiring Disclosure of Material Facts
Historically, the doctrine of caveat emptor, or “buyer beware,” shielded a seller of residential real property from liability. Under this doctrine, the burden is placed on the buyer to inspect and ascertain the condition of the property prior to closing. Mere nondisclosure of a fact is not enough to constitute an actionable case of fraudulent concealment when parties are dealing in an arm’s length transaction and have equal opportunity to examine facts that lie equally open to both the seller and the buyer. See Ramel v. Chasebrook Construction Co.
However, in 1985 the Florida Supreme Court placed severe restrictions on this doctrine. In Johnson v. Davis, the Court stated that prior case law which distinguished between affirmative misrepresentation and mere concealment of a fact results in unjust outcomes and violates principles of equity and fair dealing. The Court ultimately held that “where the seller of a home knows of facts materially affecting the value of the property which are not readily observable and are not known to the buyer, the seller is under a duty to disclose them to the buyer.”
What About “As-Is” Contracts?
It is true that the doctrine of Caveat Emptor was largely reduced as a result of the Johnson v. Davis holding, however, it was not eliminated in its entirety.
The Florida Bar and Florida Realtors jointly created a form contract titled “’AS IS’ Contract” that is frequently used in the sale of residential real estate. Under the terms of this contract, the buyer is afforded a reasonable amount of time to inspect the property and make a determination that the condition is suitable to move forward with the purchase. If a buyer does not exercise their due diligence right to inspect, he will assume the risk that the property is inadequate.
The concept that a buyer bears the risk under such a contract may lead some sellers to believe that they do not need to make any disclosure regarding the condition of the property. However, sellers who are parties to an “As Is” Contract should be aware of section 10(j), which provides as follows:
“Seller knows of no facts materially affecting the value of the Real Property which are not readily observable and which have not been disclosed to Buyer. Except as provided for in the preceding sentence, Seller extends and intends no warranty and makes no representation of any type, either express or implied, as to the physical condition of the property …”
Under this section, a seller is still obligated to disclose any fact that they have knowledge of (or should have knowledge of) if it is one that a buyer cannot discover through a reasonably diligent inspection. For example, if a home is prone to water intrusion during periods of heavy rain and there is no rainfall during the buyer’s inspection period and there is no visible evidence of water damage, this is a fact that should be disclosed by the seller because the buyer does not have a reasonable opportunity to discover this issue on their own.
Also noteworthy is that the restrictions on caveat emptor’s applicability as established in Johnson v. Davis were in the residential context. The doctrine is very much so alive in the context of commercial real estate sales, specifically if the contract contains an “as is” provision. The Florida Fourth District Court of Appeals in Florida Holding 4800, LLC v. Lauderhill Mall Investment, LLC stated Florida courts will continue to apply the doctrine unless one of the following exceptions apply:
- Where some artifice or trick has been employed to prevent the purchaser from making independent inquiry;
- Where the purchaser does not have equal opportunity to become apprised of the fact; and
- Where a party undertakes to disclose facts and fails to disclose the whole truth.
Disclosures Required by Brokers and Real Estate Associates
As mentioned above Johnson v. Davis obligates a seller to disclose certain facts related to the property’s condition. It is important to note that real estate brokers and associates in Florida also owe certain duties to a potential buyer. As established by Fla. Stat. § 475.278, brokers and agents are required to disclose all known facts that materially affect the value of residential real property and are not readily observable to the buyer.
For example, a seller enters a listing agreement with a realtor. This particular seller has never resided in the property and has used it as a rental income property for the duration of his ownership. The realtor the seller engages actually sold the exact same property 10 years ago and was aware of a leaking roof. Under these circumstances, the seller may not have knowledge of this fact, but the realtor nonetheless has a duty to disclose it to the buyer.
Facts That Do NOT Require Disclosure
Home buyers take numerous factors into consideration when purchasing a property, some of which extend beyond the physical elements of the home but are nonetheless important to a buyer. Regardless, there are certain facts that sellers and their agents are not obligated to disclose, no matter how unappealing they may be.
In Azam v. M/I Schottenstein Homes, Inc. the Fourth District Court of Appeal distinguished between physical defects in the property being purchased and off-site conditions. Under the ruling of this case, sellers generally do not have an obligation to disclose facts concerning adjacent properties when those facts can be discovered through a diligent search of the public records. Furthermore, under Fla. Stat. § 689.25, sellers, brokers and agents need not disclose:
- The fact that an occupant of a property is infected with HIV or has been diagnosed with AIDs
- The fact that a property was, or was at any time suspected to have been, the site of a homicide, suicide or death.
The aforementioned facts are not considered to materially affect the physical condition of the property being sold. However, if a seller or his agent are directly asked a question regarding such, they cannot misrepresent the facts.
Whether you are buying or selling a property, disclosures are extremely important as the failure to disclose a latent or material defect may give rise to an action by the purchaser against either the seller, his agent, or potentially both and result in severe legal consequences. In Florida, there is not a single bright line rule that governs the required seller disclosures and each party to a contract is encouraged to discuss their rights and obligations with an attorney experienced in the area of transactional real estate.
*This post is intended to be informational in nature and should not be construed as legal advice. Please contact our office if you have questions regarding a specific legal concern.*