Misrepresentation by a Real Estate Professional: Claims for Negligent or Unintentional Misrepresentation

Posted By on July 28, 2015

Have You Been Harmed?

Negligent misrepresentation by a real estate agent or broker can also be described as an unintentional misrepresentation; where the agent or real estate broker communicates something that is not accurate or true, but they are not doing so knowingly.

In these situations, the real estate professional does not mean to deceive anyone. They’re probably not trying to pull a fast one to get through closing and get that commission check deposited in their bank account. They make a mistake. They commit an error. However, it’s a big mistake or error, not a little one and enough that the buyer wouldn’t agree to buy or the seller wouldn’t agree to sell if the facts were all out there (or the mistake or error is large enough that it has some material impact on the value of the property or causes a financial harm to one of the parties).

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What is Negligent Misrepresentation Under Florida Law?

In a negligent misrepresentation case, the agent or broker has failed to meet their legal duty of care in some way, and that failure has caused damage or harm to someone to whom they owe that legal duty of care. Even if the agent or broker does not have any actual knowledge that something they have said is not true, they can probably still be held liable (they can still be held liable even if they believe the information they share is completely correct at the time they speak). To be safe, a good real estate agent will investigate to see if the information they share is accurate.

The key here? Agents and brokers owe a legal duty to their customers. Listing agreements (and/or buyer representation agreements) will sometimes set forth those duties (duties are also set forth in statutory law and in case law). However, be careful, some of these agreements will include language limiting an agent or broker’s legal duty of care (which is why having a real estate lawyer review those agreements can be of value).

Mistakes are made in residential real estate sales. People are human, right? There is legal recourse for buyers and sellers who are hurt by mistakes made by real estate professionals.

Remedies for Unintentional Misrepresentation

 

1. Claims on Insurance Coverage

Florida real estate professionals are also sometimes covered by insurance policies in the event that they make mistakes that hurt someone. These are called “error and omission” policies. If someone is hurt by the actions of a real estate agent or real estate broker, (for failing to act or sharing incorrect information, etc.) then a claim can be made against that “E&O” policy to cover the costs of the mistake.

It’s important for buyers and sellers to know that there is no law that requires real estate agents or brokers to carry E&O insurance coverage. Still, given the risk that makes Florida real estate brokers liable for the mistakes of their agents, it’s considered a smart business practice to pay for these policies. Most licensed residential real estate professionals here do have E&O insurance coverage to cover them in the event they make a mistake.

2. Licensure Revocation or Discipline

In Florida, real estate brokers and  real estate agents, are required to be licensed by the State of Florida to do business here. Licenses are issued, in part, to protect sellers and buyers from mistakes and errors by the brokers and agents. This is done by requiring the professionals to take examinations proving their knowledge of real estate before they can get licensed and by requiring continuing education on a yearly basis. See, Florida Statutes 475.001 et seq. If someone gets hurt by a licensed real estate agent or broker, one action that can be taken is seeking the suspension or revocation of that license by the state.

It’s important to know that this doesn’t mean that everyone out there working in the Florida residential real estate market as a real estate agent has an active, clean license to do so. Buyers and sellers should make sure that they are working with a licensed real estate professional.

3. Rescission and Refunds

Other remedies that can be pursued under Florida law for negligent misrepresentation by a real estate agent or broker include things like:

  • Rescission of the sale (voiding the transaction); and
  • Seeking a refund of all the real estate commissions that have been paid.

An Example of Where the Buyer Wasn’t Told Everything About the Condominium By Her Broker / Agent

Here’s an example of negligent misrepresentation.  In the case of Baldoria v. Security Realty Inv., Inc., a buyer named Margaret Baldoria signed a real estate sales contract with sellers Irving and Diane Feinzig. She was buying their condo. Security Realty Investment, Inc., was acting as the buyer’s real estate broker. Mrs. Baldoria provided $10,000 as a deposit; Security Realty acted as escrow agent for that money.

However, during the closing process, Mrs. Baldoria learned that the condo unit she had agreed to buy was subject to a recreation lease. She didn’t want that. Additionally, the parking for the condo unit was less than what Mrs. Baldoria had been told she would have.

Mrs. Baldoria complained to Security, and demanded return of her deposit. As escrow agent, upon instructions from the Feinzigs, Security refused. So Mrs. Baldoria went to court, filing a lawsuit based upon negligent misrepresentation.

Specifically, the buyer sued her Florida real estate broker for negligent misrepresentation on the part of the broker and the agent that worked for the real estate brokerage. As buyer, she sought in damages (1) that her deposit be returned to her and (2) the contract for purchase of real estate rescinded.

She argued that she had been induced to sign the purchase contract by the negligent misrepresentations by her broker of what she was getting, and that she would not have agreed to buy the Miami condo if she had known about the limited parking and the recreation lease.  At trial, the jury agreed with her. (The case was later appealed but only on the issue of who paid her attorney’s fees.)

See, Baldoria v. Security Realty Inv. Inc., 581 So. 2d 189 (Fla. Dist. Ct. App. 1991).

Victim of Negligent Misrepresentation?: A Florida Real Estate Lawyer Can Help

If you or a loved one has been the victim of a misrepresentation by a broker or agent, then you may have legal remedies available to you against your broker or agent. Seeking out the help of an experienced Florida real estate attorney to negotiate on your behalf, and to file a lawsuit if necessary, may be what is needed in order for you to get justice.  An experienced real estate lawyer will know from experience what information a real estate agent is required to share and what information a real estate agent should verify and/or investigate before sharing with an interested party.

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Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at info@hallandalelaw.com, or (954) 458-8655. If you have a specific or personal situation, please call or email Larry because he can’t answer specific fact questions in general comments.

How to Get a Refund of Your Security Deposit from the Landlord When Renting a Home or Apartment

Posted By on July 21, 2015

When you rent an apartment or condo here in Florida, normally the landlord will require that you give a security deposit before you can move into your new home. This is pretty much standard operating procedure for rentals; most tenants know they will have to hand over several hundred dollars (or a month’s rent) when they sign their lease agreement. However, as most renters have learned the hard way, it is much easier for that landlord to take your security deposit than it is for them to return it to the tenant when the tenant moves out.

Lots of landlords will try and find all sorts of excuses for holding onto some, if not all, of that security deposit. What can a tenant do under Florida law to get that security deposit back?

 

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1. Florida Statute 83.49 Controls Return of Tenant Security Deposit

Since 1969 there has been specific law in place to deal with landlord – tenant disputes over security deposits, which is when Florida Statute 83.49 was passed. It’s been amended several times over the years, but in essence the security deposit law deals with two big issues:

  • Who gets the security deposit money after the tenant moves out?
  • How must the landlord protect that security deposit money while the tenant is living in the rental property?

While Florida doesn’t protect tenants as much as some other states, the law does work to keep landlords from blatantly keeping that security deposit for themselves.

2. What Is A Security Deposit?

The lease itself will define how much the security deposit is for a specific rental; it can be negotiated between the landlord and the tenant. The parties can even agree not to have one.

Under Florida Statute 83.43(12), “security deposit” is defined as: “any moneys held by the landlord as security for the performance of the rental agreement, including, but not limited to, monetary damage to the landlord caused by the tenant’s breach of lease prior to the expiration thereof.”

The security deposit is money set aside to protect the landlord against damages, like the tenant leaving before the end of the lease or the tenant damaging the rental property.

3. Do Landlords Have to Keep Security Deposits in a Separate Bank Account?

When a tenant provides a security deposit, the landlord cannot just pocket the money. The landlord is legally required to protect it pursuant to Florida Statute 83.49(1) by keeping it in a separate bank account from rents and other monies.  This is true whether or not the lease agreement has any language about the landlord segregating the security deposit.

If the landlord hasn’t kept the security deposit safe in that separate account, then the tenant may have an argument and claim against the landlord for “unjust enrichment.”  That’s because Florida law won’t consider the money to be a “security deposit” as defined by the statute if the legal requirements aren’t met by the landlord.

For instance, in the case of Atlantis Estate Acquisitions, Inc. v. DePierro, the DePierro family moved into a residential rental property owned by Atlantis Estate Acquisitions. They signed a year’s lease.

The tenants paid for the entire year’s rent lump sum when they signed the lease. Their lease agreement also provided that a security deposit equal to their first month’s rent would be provided, in addition to a pet deposit.

There was trouble over the course of the tenancy; the police were called out to the home for parties given by the teenage DePierro kids. After that, the landlord came to inspect the home and discovered lots of damage to the home’s interior. The landlord sent a notice of termination of tenancy; the tenants moved out but claimed that they repaired the property before they left.

Then the DePierros demanded a return of their security deposit. The landlord refused, so they sued.

From the evidence, the trial court found that the landlord failed to keep the security deposit in a separate account according to Florida Statute 83.49(1). Since it was not segregated, the trial judge ruled it was legally not a “security deposit” but instead “advance rent” paid by the DePierros and by keeping it, the landlord was guilty of unjust enrichment.

Tricky part in this case: most tenants don’t pay for the entire year’s rent in one check, like this family did. That made a difference in their case on appeal.

POINT: The tenant can get their security deposit back if the landlord cannot prove that the security deposit was kept in a separate account as required by Florida law. The landlord cannot “unjustly enrich” him or herself with the tenant’s security deposit money.

4. Procedure for Security Deposit to be Returned by Landlord

In most Florida leases, there are normally provisions for returning the security deposit to the tenant. If the lease doesn’t give details on how the security deposit is to be returned, then Florida Statute 83.49 will provide the details.

Under Florida Statute 83.49, once the tenant moves out then he or she has to give notice to the landlord (the notice given by the tenant should include the tenants forwarding address, among other things). After the tenant moves out, Florida Statute 83.49 gives the landlord a 15 day deadline to return the security deposit back to the tenant.

However, if the landlord decides to make a claim against that money, then he or she has 30 days to give the tenant proper legal notice (in writing and sent by certified mail) that he or she is making a claim against the money. The notice has to provide details, and the landlord has to follow the language of Florida Statute 83.49(3)(a).

If the landlord doesn’t follow the the law, then the tenant must object within 15 days or the landlord may have an argument that the tenant has waived their claim for the security deposit. No objection, and the landlord can just deduct what he or she thinks is just for their claim and then send the remainder to the tenant. The landlord then has 30 days from the date of his or her notice to the tenant to sent back the net deposit amount.

This outline lays out the general rule; however, there are exceptions. Also, there are legal arguments that tenants can make against a landlord to get their money back. How landlords make claims against security deposits and what tenants can do to fight over zealous landlords will be discussed in upcoming posts — If you are facing a security deposit issue, we recommend speaking with a Florida real estate lawyer because the law provides for the payment for attorney fees in the event the landlord is determined to have violated the law. 
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Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at info@hallandalelaw.com, or (954) 458-8655. If you have a specific or personal situation, please call or email Larry because he can’t answer specific fact questions in general comments.

 

10 Articles For Florida Condominium Owners

Posted By on July 14, 2015

Since we receive so many calls about condo owner rights, I thought it would be a good idea to share some articles we have written in the past about Florida Condominium Law that answer some of the most frequently asked questions. Here are 10 articles that we hope you will find helpful:

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Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at info@hallandalelaw.com, or (954) 458-8655. If you have a specific or personal situation, please call or email Larry because he can’t answer specific fact questions in general comments.

Three Common Issues With Mortgage Financing and Florida Residential Closings

Posted By on July 7, 2015

In South Florida, most residential real estate closings involve a buyer obtaining a home loan to finance the purchase.  When the homeowner obtains a mortgage he or she gives the bank a lien on the property until that loan is paid in full. This mortgage also gives the lender the right to have the homeowner perform certain tasks, some of these tasks are at the discretion of the bank and some are required by law. At times, for both seller and buyer, a bank’s involvement with a residential closing can make a closing seem like a big tangled knot of frustration.
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Three Common Areas Where Issues Arise For Buyers When Bank Financing is Used to Purchase Florida Residential Real Estate

1. Mortgage Documents Must Be Followed, Reviewed and Signed

The lender will have lots of requirements and documents to be read and signed before the loan can be finalized and the loan proceeds provided for closing. All of these documents can be confusing, overwhelming and downright scary for buyers (especially first time home buyers).  These include documents like:

The Promissory Note

This legal document sets forth the amount of the debt (or the amount the homeowner borrowers), the time period agreed upon to pay it off, the interest rate, late fees, grace periods, and the buyer’s promise to pay the loan in full in return for the bank’s performance of loaning the buyer the money needed to purchase the property.  The promissory note also requires the borrower to pay the costs for obtaining the loan.

The Mortgage

This is the document provided to the bank by the buyer which creates the lien on the property and is used as collateral for the repayment of the Promissory Note.  This is also the document that the bank uses to foreclose on the condo or house if the homeowner defaults (i.e., failing to pay the promissory note) and it requires the borrower to perform certain tasks like, keeping the property insured, paying the real estate taxes, preventing any material alterations to the property without the lenders consent and requires the repayment of the entire balance of the Promissory Note in the event the property is sold, leased, or transferred without the bank’s prior written consent.

Additional documents you can expect the lender will require you to sign include, a TRID Notice, a uniform residential loan application, a good faith estimate, a truth-in-lending disclosure statement, an acknowledgment of receipt of home ownership counseling notice, home ownership counseling list, an authorization for the social security administration (ssa) to release social security number (ssn) verification, a notice of right to receive a copy of appraisals, authorization to release information, a mortgage brokerage business contract, notice to the home loan applicant credit score information disclosure, affidavit of occupancy, anti-coercion statement, equal credit opportunity act disclosure, flood disaster protection act of 1973 disclosure, mortgage loan origination agreement, patriot act information disclosure, privacy policy disclosure, servicing disclosure statement, IRS Form 4506-T – Request for Transcript of Tax Return, Florida mortgage brokerage fee agreement, and an informed consumer choice disclosure notice.

2. Choosing the Lender: Closing Cost Comparisons and Choosing The Service Providers

When buyers apply for a mortgage, the lender is required by the Federal Real Estate Settlement Procedures Act (RESPA) to provide a good faith estimate of closing costs within 3 days of receiving the buyer’s loan application.

Buyers don’t have to use a specific lender, and the buyer can apply for a home loan with several different mortgage lenders. Getting these closing cost estimates really helps the buyer, but it can be overwhelming because of all of the numbers that have to be compared –  also, some of the numbers are just estimates and some services can be shopped for by the buyer (i.e. the closing agent, the inspection company, and the survey company).  Some buyers have no prior relationship with certain types of service providers, which can make the closing process more uncomfortable  for a buyer.

3. Title Work

The lender will want to have the real estate title examined, since it is the real estate that is securing the promissory note. Therefore, the bank will ask for things like title searches and title insurance policies (with the bank named as an insured party). Getting the title history examined and the title insurance policies issued can take time — and if there are any problems that pop up, closing can be delayed. Both the title search and the title insurance policy premiums are part of the closing costs in any residential transaction.

Title History: the “Title Search”

Lenders will require that the borrower / buyer pay for a title company to run a “title search” of the local real estate records held in the county clerk office to confirm that the seller has a clear title to transfer. If the seller isn’t owner of a clear title to the property, the title search will reveal it and then the lender can block funding of the mortgage until the problem is cleared.

Title Insurance

As an added protection, the lender will also ask that its borrower, the buyer, buy an insurance policy to protect against any issues that may appear in the title.

Title insurance policies are issued with the mortgage lender as an insured party, and if any title problems claims arise during the life of the loan (for example, easement claims, claims by heirs and/or mortgages that weren’t satisfied), then the bank can file a claim on this policy. The buyer almost always buys their own title insurance policy to cover the buyer’s own interest in the real estate.

Florida Real Estate Lawyers Can Add Value

An experienced Florida real estate lawyer can add value by sharing with the buyer how most mortgage lenders and third party service providers operate, resulting in a smooth and efficient closing process. More often than not, a real estate lawyer will discover an issue that he or she is obligated to disclose to the buyer, that a title company may not feel is important to share with the buyer (i.e. prior title issues that were “papered over”, open permits, etc). Additionally, the cost of having a real estate attorney assist in a Florida home closing, in most instances, does not cost the buyer any more money than if a title company closes the transaction.

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Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at info@hallandalelaw.com, or (954) 458-8655. If you have a specific or personal situation, please call or email Larry because he can’t answer specific fact questions in general comments.

 

What Happens When a Seller Defaults on a Residential Sales Contract in Florida?

Posted By on June 30, 2015

What happens when a seller defaults on a real estate contract?

It is true that in many residential real estate transactions, it is the buyer that has second thoughts about buying that home or condo and tries to find a way to back out of the deal. However, that’s not always the case; sellers often decide they don’t want to go ahead with selling their property, too.

So, in South Florida, what happens when the seller gets cold feet or the seller can’t perform what he or she contracted to do? The answer lies in the contract.

Does the Language of the Florida Residential Sales Contract Control?

Here in South Florida, most people who are selling a home, condominium, townhouse, or other residential real estate will use a “standard” residential purchase and sale contract form, one of several that are recognized in Florida for residential real estate transactions.

These residential purchase and sale contract forms, once signed by the parties, becomes the document that governs their transaction.

The contract, for instance, outlines what happens in the event of default by either the seller or the buyer (which is one more reason why it is so important to have a Florida real estate lawyer review your documents for you when you are buying or selling a house or condo here).

There is not just one sale contract form used here and throughout Florida; there several “standard” Florida real estate contracts which buyers and sellers can use. However, in the tri-county area of Broward County, Miami-Dade County, and Palm Beach County, most sellers and buyers execute one form which was drafted, finalized, and approved in a joint effort between the State Bar of Florida and the Florida Realtors (TM) association.

Is a “Default” Defined in the Sales Contract?

How and when a seller defaults on a residential real estate contract is spelled out in the contract itself. Pursuant to the language of the Florida Bar – Florida Realtors (TM) form ASIS-3 agreement, default is defined in paragraph fifteen (15) for both the buyer and the seller.

Reading that paragraph you will find the following description of when the Seller is consider to legally default on the deal:

(b) SELLER DEFAULT: If for any reason other than failure of Seller to make Seller’s title marketable after reasonable diligent effort, Seller fails, neglects or refuses to perform Seller’s obligations under this Contract, Buyer may elect to receive return of Buyer’s Deposit without thereby waiving any action for damages resulting from Seller’s breach, and, pursuant to Paragraph 16, may seek to recover such damages or seek specific performance. This Paragraph 15 shall survive Closing or termination of this Contract.

What does that mean? The Buyer can ask for their deposit to be returned to them and either sue the Seller for damages or seek to force the Seller to sell the property to the Buyer.

If the Seller fails to “make title marketable after reasonable diligent effort,” that is NOT considered a default. Sales contracts have time limitations within them; there is a deadline for closing a transaction. If the Seller cannot get clear title to the home or condo within that time period, despite his or her reasonable efforts to do so, then the Seller will not be considered in default under the language of this form contract paragraph (in this case, the buyer can either cancel the contact and receive his or her deposit or proceed with the transaction and accept the title as is).

Examples of a Seller default include:

  • Not allowing access to the property for inspections;
  • Not providing condominium documents to the buyer before the closing date; and
  • Not providing or disclosing material facts within the Seller’s knowledge that affect the value of the Property and are not readily observable to the Buyer.

How is a Breach of a Sales Contract Settled?

In instances where the Seller is in default as defined by the Default provision of the contract, what can the buyer do to settle the dispute? Again, the language of the contract itself will control what happens. In the form agreement referenced above, the parties agree to take their controversy to an alternative dispute resolution forum (aka mediation) before either party can file a lawsuit. The form contract also handles who pays what in fees and expenses in a mediation and any subsequent litigation.

According to paragraph 16:

DISPUTE RESOLUTION: Unresolved controversies, claims and other matters in question between Buyer and Seller arising out of, or relating to, this Contract or its breach, enforcement or interpretation (“Dispute”) will be settled as follows:

(a) Buyer and Seller will have 10 days after the date conflicting demands for the Deposit are made to attempt to resolve such Dispute, failing which, Buyer and Seller shall submit such Dispute to mediation under Paragraph 16(b).
(b) Buyer and Seller shall attempt to settle Disputes in an amicable manner through mediation pursuant to Florida Rules for Certified and Court-Appointed Mediators and Chapter 44, F.S., as amended (the “Mediation Rules”). The mediator must be certified or must have experience in the real estate industry. Injunctive relief may be sought without first complying with this Paragraph 16(b). Disputes not settled pursuant to this Paragraph 16 may be resolved by instituting action in the appropriate court having jurisdiction of the matter. This Paragraph 16 shall survive Closing or termination of this Contract.

ATTORNEY’S FEES; COSTS: The parties will split equally any mediation fee incurred in any mediation permitted by this Contract, and each party will pay their own costs, expenses and fees, including attorney’s fees, incurred in conducting the mediation. In any litigation permitted by this Contract, the prevailing party shall be entitled to recover from the non-prevailing party costs and fees, including reasonable attorney’s fees, incurred in conducting the litigation. This Paragraph 17 shall survive Closing or termination of this Contract.

Can a Real Estate Lawyer Add Value and Help?

If you have signed an agreement to buy a home here in Florida, or if you’ve signed a contract to sell your residential real estate, then you should be familiar with and know your rights and obligations under your agreement.  Often times, clients will want to know how they can walk away from a deal without repercussions, including being be forced to pay damages and attorney fees. Usually, these situations can be resolved with the help of an experienced Florida real estate lawyer, through settlement negotiations, with the goal of avoiding a prolonged and expensive court battle.

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Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at info@hallandalelaw.com, or (954) 458-8655. If you have a specific or personal situation, please call or email Larry because he can’t answer specific fact questions in general comments.

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