Disclosures to Home Buyers: Florida Statute 475.278 and the Real Estate Agent Relationship

Posted By on January 27, 2015

For Florida real estate lawyers, it’s shocking to contemplate all of the many ways that Florida real estate agents and Florida real estate brokers have found to be underhanded in their dealings with buyers and sellers, all in the name of making a quick buck. The past few years (the time when the Florida real estate market has been rocked with widespread mortgage fraud and foreclosure actions) seems to have fueled bad acts by Florida real estate professionals.

It’s no wonder that the Florida Legislature has passed a series of laws requiring disclosures be made to potential buyers of Florida residential real estate, making it illegal for real estate professionals not to reveal and provide certain information about a property (like the dangers of radon gas). (See last week’s post for details here.)

Disclosure Under Florida Statute 475.278: Relationships Not Real Estate

However, there’s one real estate disclosure law that is particularly important here in Florida. It is Florida Statute 475.278, which protects residential real estate buyers from unethical real estate professionals by forcing disclosure of information that has nothing to do with property or houses. Florida Statute 475.278 requires a specific type of disclosure that must be made to the buyer — the disclosure of the kind of relationship and duties that exists between the buyer and the real estate agent.

Why? Because buyers may assume that the real estate agent who is showing them houses they might like to buy, or is chatting with them about the best neighborhoods for their kids or the quality of life for singles or families in a particular section of Miami or Fort Lauderdale or Palm Beach is working for them and is on their side. Wrong.

That assumption may be totally wrong and the friendly, charming real estate agent isn’t really working just on their side and solely in their best interests at all. Which makes Florida Statute 475.278 extremely important.

Specific Requirements in Florida 475.278 Residential Real Estate Disclosures

Since the risk of a residential real estate buyer or seller not understanding the limitations of their real estate agent or real estate broker relationship, not only are disclosures regarding the professional relationship requirement to be made under Florida law, they must be made in specific ways.

First, these disclosures must be written and documented. Second, they must confirm to specific legal requirements under Florida Statute 475.278 (c) including:

  • They must be in uppercase and in bold font face so the disclosure is easily read;
  • They must be placed in a prominent way within the document so that the information is easily found.

Types of Florida Real Estate Sales Relationships: Single Agent and Transactional Broker

Florida real estate brokers can act as either “single agents” or “transactional brokers.” Florida law defines both these terms. A Florida single agent relationship carries with it the highest duties to the customer (either a buyer or seller) because it means that the real estate professional is dedicated to serving only that customer’s best interests. (For more on the transactional broker relationship, see our earlier post.)

Single Agent Disclosure

How do you know if you have a “single agent” relationship with a Florida real estate broker? Check your contract.

Under Florida Statute 475.278(3)(a), there must be a written disclosure by the Florida real estate broker in a written representation agreement that includes specific information including:

  • The relationship is a “single agent” relationship
  • The real estate professional has a duty to the client to act with loyalty, confidentiality, and honesty
  • The real estate professional will provide full disclosure including complete accounting of all monies
  • All offers and counter-offers will be shared timely with the client.

Transactional Broker Disclosure

In Florida, a “transactional broker” has a limited deal with the buyer or seller and does not act as a fiduciary for either party. There’s no loyalty dedicated to one party in the real estate negotiations here: the real estate professional works with both sides to get a deal done.

Florida Statute 475.278(c) makes real estate professionals reveal this role to both sides in writing as well as informing everyone involved that the real estate professional, under Florida law, is required to do things like:

  • Be honest with everyone
  • Account for all monies involved in the transaction
  • Disclose all material facts regarding a property even if they are hidden and not readily seen.

Transaction Broker Is Default Real Estate Relationship in Florida

Under Florida Statute 475.278(1)(b) it is legally established that unless there is a written agreement otherwise, the real estate professional is acting as a transaction broker.

If you want a single agent relationship with your real estate agent, then you need to get them to sign a Single Agent Representation Agreement with you.

Harmed by Failure of Florida Real Estate Agent to Disclose?

If you think you have been harmed by the failure of a Florida real estate professional to disclose things that they are legally required to do under Florida Statue 475.278, then you may have a legal claim for damages to pursue against the real estate sales associate as well as the real estate brokerage firm.

A Florida real estate lawyer can help you assess your situation and the best course to take here. Additionally, you may be able to file a complaint with the Florida Real Estate Commission for bad acts on the part of the real estate professional. The Commission can then act to punish the wrongdoer in several ways, including fines and suspension of their real estate license.

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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 Disclosures Are Required in Florida Residential Real Estate Transactions?

Posted By on January 20, 2015

It is not “buyer beware” in Florida for anyone looking to buy residential real estate. Florida home buyers are protected by specific laws passed by the Florida Legislature that force developers, realtors, real estate agents, and real estate brokers to reveal certain conditions about the property they intend to buy.

Of course, these statutes were passed only after so many buyers were harmed by the failure of an unethical real estate professional (and Seller) to let the buyer know about hidden problems with a property. Some real estate agents don’t think they need to tell the home buyer about something like an illegal home addition or conversion, or the fact that the agent is really working on behalf of the seller and not the buyer.

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What Are Florida’s Disclosure Laws in Residential Property Transactions?

In Florida, there is no one, overall disclosure law that applies to residential real estate. Instead, there are a series of laws that have been passed over time regarding residential disclosure requirements. We’ve already discussed Florida Statute 689.25, and we will look into Florida Statute 475.278 (realtor disclosing nature of relationship w/ buyer and/or seller) in a future post.

However, here are a few disclosures worth discussing now:

1. Coastal Property Disclosure

Florida Statute 161.57 requires disclosure of things like the possibility of coastal erosion; meaning, that the property is subject to federal, state and local regulations on limitations regarding construction; and there are environmental regulations that apply, such as protections for marine turtles.

2. Radon Gas Warning

Florida Statute 404.056(5) makes it illegal for a real estate professional to fail to disclose in writing of the dangers of radon gas. The law mandates that specific language be included in the purchase documents that states:

“RADON GAS: Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county health department.”

3. Mandatory Membership in Homeowner’s Association

Florida Statute 720.401 specifies that anyone buying a home in a community with a homeowner’s association must be notified that they will be required to be a member of the association, and that as a member, they will be asked to pay for things like assessments and fees (at the risk of a lien being placed on their property for failure to pay these sums). The law also provides for voiding the sale if the proper disclosures have not been made.

4. Florida Condo Disclosures

Florida Statute 718.503 (1), (2), and (3) are laws that apply to the purchase of Florida condos and make it illegal for any residential condominium developer or unit seller in Florida to fail to let condo buyers know in advance of purchase of many specifics that apply to the condo lifestyle and the particular condo being purchased. These include things like:

  • Their right to see and review bylaws and association documents before closing;
  • The details regarding property management, including the management contract;
  • Whether or not the condominium includes time shares;
  • Details including the right to review any recreational leases of the condominium; and
  • Proof of legal ownership of the real estate and its improvements by the developer and/or the unit owner acting as seller.

If these disclosures are not made by the developer, or the unit owner who is selling the condo, in WRITING, and including the specific language found in the statute (there is a 3 day right to rescind a transaction from the date of delivery of these documents) , then the law allows the buyer to void the contract. (718.503 (1)).

Fighting Back Against Failures to Disclose

Even with these laws in place, buyers in Florida are still hoodwinked by real estate agents that fail to disclose information about the residential property. In these instances, the buyer need not suffer buyer’s remorse: there are legal remedies available to him or her under Florida law that may allow for the rescission of the deal (meaning, the unwinding of the transaction) or monetary damages.

An experienced Florida real estate lawyer can be invaluable in helping a Florida home buyer who has been victimized by a failure to disclose a condition (or a misrepresentation of a condition) to get justice.

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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.

Can Your Landlord Keep Your Security Deposit?

Posted By on January 13, 2015

All of us have rented an apartment, condo or townhouse at one time or another during our lifetime. In some cases, after we have moved out we have had to deal with issues with our landlord related to our security deposit. In fact, a lot of calls I receive from tenants revolve around landlords keeping their security deposit.

What is the Law in Florida on Security Deposits?

A security deposit is designed to protect the landlord for any damages caused to the premises by the tenant or for any rent not paid by the tenant. How the money is returned to the tenant is governed by Florida Statute 83.49. When the tenant vacates the premises at the end of the lease term, or otherwise, it is the landlord’s responsibility to send written notice to the tenant of the landlord’s intention to keep the deposit because of damages (i.e. failing to pay rent or physical damage to the premises caused by the tenant). The notice the landlord is required to send must be sent by certified mail within 30 days of the tenant vacating the premises (If the landlord does not make a claim against the deposit, then the deposit must be returned to the tenant within 15 days of the tenant vacating the premises). The notice must state the amount of the deposit being withheld with specific reasons stated in the letter. The landlord must also inform the tenant he or she must respond within 15 days and include an address where any objections can be mailed or the money will be forfeited to the landlord.

For example, if a tenant plans to move out prior to the end of their lease agreement, the landlord will likely want to withhold the security deposit. If the landlord fails to give written notice within 30 days of the tenant vacating the premises, the tenant is entitled to the return of their security deposit without any reduction. Please note, If the landlord fails to send proper notice and is forced to return the security deposit, the landlord still has the right to file an independent lawsuit against the tenant for damages to the premises.

Does a Tenant Forfeit their Deposit if a Tenant Breaches The Lease?

Often, a written lease in Florida will include a clause stating that the tenant forfeits his or her security deposit if the tenant breaches the lease. Under Florida law, if the clause is a liquidated damage clause it is enforceable, however, if it is a penalty clause it is not enforceable. If the amount of damages is not measurable at the time the contract is signed, it will be considered to be a liquidated damage clause. The reason being, when a tenant signs a lease that includes a security deposit, it is not yet known what damages the landlord will be entitled to recover if the tenant breaches the lease.

When is a Tenant Not Entitled to The Return of Their Security Deposit?

In my experience, the majority of security deposit cases are small claims cases since the amount in question is usually less than $5,000. Although the rules of evidence apply, the rules are to be liberally followed. Meaning, the judge can exercise his or her discretion in determining the amount of damages. So, if the landlord states the cost to clean a carpet was $500 and does not have a receipt for services, the judge can base the decision if that amount is reasonable based on his or her experience hearing similar cases.

Thus, if a lease states that the tenant is liable for normal wear and tear, including cleaning the carpet upon vacating the premises, the landlord will be permitted to apply the security deposit to clean the carpet.

Another example is where the property the tenant is renting is infested with mold. In the situation where the tenant has a mold claim against the Landlord, and the tenant wants to move out, the tenant is required to provide the landlord with a 7 day notice giving the landlord an opportunity to fix the issue (see Florida statute 83.56). Unfortunately, most tenants aren’t aware of this procedure and vacate the premises without giving notice to the landlord to fix the condition. If the tenant moves out without giving the landlord an opportunity to remedy the mold, then the landlord will likely end up keeping the security deposit (provided, of course, the landlord follows the steps outlined above).

Is Your Landlord Keeping Your Deposit?

If you are a tenant dealing with the loss of your security deposit, it’s important to understand the requirements that a landlord must follow in order for he or she to make a claim against your deposit.  This is especially true if the tenant has moved out and the landlord has not returned the deposit and has never sent notice of their intent to make a claim on the deposit. Legal guidance from a Florida real estate lawyer can be very helpful in this situation.

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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 Is A Condominium Termination In Florida?

Posted By on January 6, 2015

In Florida, condominiums are considered as legal entities, just like corporations, with Boards of Directors and owners and creditors. When you decide to buy a home in a Florida condominium, you are becoming part of this legal entity as one of its unit owners.

This makes reading through all of the documents that create that condominium important for each buyer because he or she will be held to the terms found in them. It’s something that you accept as part of your decision to live the condo life style.

When and What is the Termination of a Florida Condominium?

One important factor that condo owners need to understand, along with fines and assessments and common area regulations, are the ways in which the condominium can end, or “terminate.” Just like companies, no condominium will last forever. Companies dissolve; condominiums terminate. As the Florida Legislature explains:

The Legislature finds that condominiums are created as authorized by statute. In circumstances that may create economic waste, areas of disrepair, or obsolescence of a condominium property for its intended use and thereby lower property tax values, the Legislature further finds that it is the public policy of this state to provide by statute a method to preserve the value of the property interests and the rights of alienation thereof that owners have in the condominium property before and after termination. The Legislature further finds that it is contrary to the public policy of this state to require the continued operation of a condominium when to do so constitutes economic waste or when the ability to do so is made impossible by law or regulation.

The Florida Condominium Termination Law

In 2007, Florida Statute 718.117 was passed as the new Florida Condominium Termination Law. In it, the Florida Legislature revised the old statute to deal with the problems brought about by all of the Foreclosure Fraud and the overall Real Estate crisis. Other issues that brought about the change related to older condominiums, particularly in South Florida, especially those condominiums that were considering terminating themselves.  Under the old law, 100% of unit owners were required for approval of any termination. It was very hard for owners of an old condominium to terminate it even if it was the smart thing to do.

In the 2007 Statute, it is now easier for condo owners to gather together and terminate the condominium. However, it’s still a process filled with hurdles.

Changes to Florida Condo Termination Law

In Florida, now a condominium can be ended, or “terminated,” if 80% of the condo unit owners agree to dissolve it. This step is necessary if the unit owners want to sell the condo tower or complex for a profit, for instance. The new 2007 revision has increased the number of condominium terminations around the state. This isn’t necessarily good news for the real estate market or the condo owners.

In fact, since the passage of the 2007 Florida Condo Termination Law, there have been lots of problems here in Florida as some outside interests have forced condo owners to sell their properties. Unhappy home owners have been pressured to sell their condos. Sometimes, they’ve done so and still had to deal with deficiencies and leftover mortgage debt.

In 2015, Florida Governor Rick Scott will be looking to the Florida Department of Business and Professional Regulation for proposals on how to change the 2007 Termination Statute to better protect condo owners against being forced out of their homes via this law.

How Do You Terminate a Florida Condominium?

Until the Florida Legislature passes another revision to the statute, condos will continue to be terminated under the 2007 law. Under Florida Statute 718,117, the following steps are to be taken to terminate a condominium in Florida:

1. Condominium association drafts a plan to terminate the condominium which is finalized and then adopted by the association.

2. The Termination Plan must include a specific termination event. This can be termination of the condominium upon the filing of the Plan in the public records (”automatic termination”) or it can be tied to a specific event (”conditional termination”).

3. The Termination Plan identifies a “Termination Trustee” who will have title to the condominium property vested in him/her upon termination of the condominium.

4. The Condominium Termination Plan is filed in the public real estate records of the county where the condominium sits (its county of residence).

5. Notice of the recording is provided to anyone with a lien on the property. Lien-holders include mortgage holders.

6. Notice of the recording is provided to all condo unit owners.

7. Any lien-holder that does not expect to get full value of their lien has 90 days to challenge the Termination Plan.

8. After 90 days have passed from the date of recording, and/or all challenges to the Plan have been resolved, the Termination Trustee sells the property and distributes the sales proceeds as instructed in the Termination Plan.

9. Any liens regarding the condominium are discharged from the property itself with the termination; however, these liens attach to proceeds generated by the sale of the property by the Termination Trustee and they are paid first.

Are You Concerned About Condo Termination?

If you are a condo unit owner dealing with the possibility of termination of your condominium, it’s important to understand the ramifications of this action both to the condominium as a whole (your fellow owners) as well as your own financial interests. This is especially true if the unit owners are feeling pressure to sell or feeling vulnerable to outside interests. Legal guidance from a Florida condominium lawyer can be very helpful here.

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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.

Holiday Foreclosure Surprise: No Federal Income Tax on 2014 Short Sales

Posted By on December 30, 2014

Last week, before President Obama left the White House for his family holiday in Hawaii, he signed into law the Tax Increase Prevention Act of 2014. This is now the law of the land, just in time for the end of 2014, and shockingly, it passed both the House and Senate with bipartisan approval and high votes of approval (not many voted against it).

Why is this a big deal for Florida home owners?

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1. Good News for Short Sales

Well, because this end-of-the-year legislation extends prior legal protection from income taxation of any forgiveness of mortgage debt in a short sale.

Florida home owners who sold their homes in a short sale during 2014 — where their home’s sales price was less than the amount needed to cover the mortgage debt on the home — don’t have to worry about having to pay income tax on that “forgiven amount” (the difference between the two, debt and sales price).

Until President Obama signed that bill into law, everyone had to face the problem of having to pay income taxes on that difference. The only way that a 2014 short sale wasn’t going to get taxed as FIT was if the lender didn’t decide to forgive the debt and was had opted to go after the home owner for the deficiency.

Now, this was not the case for many years.

The Mortgage Debt Forgiveness Act isn’t a new creation of the current Congress. The law that became effective just in time for the holidays is merely an extension of a federal law that had been passed several years ago by the Bush Administration.

For details, read our earlier post, “2014 Surprise for Florida Underwater Mortgages: Mortgage Forgiveness Debt Relief Act Tax Break Has Not Been Extended – Deficiency Will Be Taxed in 2014.

What President Obama has done here is to extend that longstanding law to the 2014 short sales.

It is a RETROACTIVE application of federal law. It DOES NOT APPLY TO 2015 SHORT SALES.

This is a big deal for many, because as RealtyTrac researchers have noted, the average mortgage forgiveness on a short sale in 2014 was $88,456. That is a lot of money to face in federal income taxation, especially when it’s not additional money in the short sale home owner’s pocket, but an erasing of debt payments or deficiency actions from their future.

RealtyTrac estimated that the average income tax on those short sales would have been $22,114 for the short sale home owner.

So this is great news for anyone who successfully completed a short sale of their home in 2014.

2. Bad News for Short Sales

This new law isn’t great news for everyone, though. While those who completed a 2014 short sale just received a pleasant surprise in the form of a federal gift of around $22,114 they won’t have to pay in income taxes, it doesn’t help anyone who is contemplating a short sale of their home in 2015.

The law that has been signed does not extend to 2015 short sales. In 2015, home owners are going to be planning their finances just as 2014 home owners did: with the understanding that any deficiency that was forgiven by the lender will be taxed as income by the federal government.

The 2015 short sale home owner will receive a 1099 IRS Form from their lender, and the amount on that 1099 will show the amount that will need to be declared on their federal income tax return because it is legally considered as income to them.

Moreover, this is not great news for those who have moved forward with their lives with a short sale, but did not do so because they were worried about the income taxes they understood they would have to pay.

This down-to-the-wire extension of the Mortgage Debt Forgiveness Act may be seen as very frustrating and depressing to those home owners who look back to 2014 and think, “I would have done a short sale if I had known I would not have faced that added income tax.

After all, short sales fell in 2014 and we have to think that the fear of those big income tax bills was a part of that drop. And what do these home owners do now? Well, that’s a good question, isn’t it?

Any hope for 2015 short sales?

Florida home owners considering a short sale in 2015 legally will have to pay taxes on the forgiven deficiency. Any way around that? Well, an accountant (or other tax professional) may be able to argue to the IRS that the homeowner is legally insolvent and because of the insolvency the forgiven deficiency should not be taxed as income. (Before taking this position with the IRS, you must talk with your accountant, or other tax professional, to determine if this argument has any merit and if it is prudent to pursue this strategy.)

And of course, there is also the chance that the new Congress will act once again to extend the Mortgage Debt Forgiveness Act so it applies to 2015 short sales. Wouldn’t it have been nice if that had been included in the December 2014 law that was just signed?

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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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