Do Walk-Throughs and Inspections Hurt a Misrepresentation Claim?

Posted By on October 6, 2015

Last Update: 02/22/16

More and more these days, Florida real estate buyers are purchasing a home or condo without personally stepping foot on the property. When this happens, the buyer usually relies on someone acting on their behalf (e.g., a friend or family member). Moreover, with the innovations of the internet virtual tours and real estate brokers offering detailed video visits of properties to prospective buyers, it is possible for someone to buy residential real estate here without a real “look” at the property beforehand to investigate the condition of the property (also, they may buy property without paying for a professional inspector to check out the property and give them an inspection report). This is true even though the buyer has the right to have an inspection done, but it’s not legally a must.

Is this wise? It’s always best practice to step foot on any real estate before you invest your money. Also, having a professional inspector check out the property for hidden defects or repair issues can save a lot of trouble later. However, inspections can be costly. Videos and trusted “agents” may be enough for some buyers; they may think it’s worth the risk especially if they are buying a vacation home or an investment property.

However, what happens after the sale if there are problems with the home? Does this buyer waive any kind of damages claim against the seller or his / her representatives if he/she discovers problems after closing?

 

FEMA - 8 - Photograph by Dave Saville taken on 10-01-1999 in North Carolina

 

Misrepresentation for Failure to Disclose Even After Mr. Plezia’s Walk-Through

In the case of Southern Nat. Track Services v. Gilley, 152 So. 3d 13 (Fla. Dist. Ct. App. 2014), there was a lawsuit filed for fraudulent misrepresentation in a real estate deal where several cottages and a larger “modular” home were being sold together (all on one lot). The modular home was advertised as a two-bedroom residence with amenities that included a swimming pool and a fountain.

The buyer was a company named Southern National Track Services, and its employee, Mr. Plezia, was sent to check the place out and close the deal. The company wanted to buy a place where its employees could stay when they were working in the Florida area, instead of a hotel or long-term rental arrangement. Mr. Plezia would be one of those employees staying in the new corporate housing, so he was looking not only at properties as a company investment but as his personal home away from home.

The seller, D.J. Gilley, understood that Mr. Plezia was acting as agent for his company when he expressed interest in her property. Mr. Plezia visited the site before making any deal; it wasn’t a long visit.

He walked through the property with the real estate agent, with all its cottages as well as the main house.

He did a second walk-through with the seller personally. During that second visit, the seller told Mr. Plezia details about the main house that supported his idea that it had been designed and built as single family housing. He was told that the seller, her daughter, and her parents had all lived in the two-bedroom modular home at one point.

Mr. Plezia signed a purchase agreement for the place. In it, he was given a right to have a property inspection by a “home inspector” within 20 days of accepting the seller’s offer. The purchase agreement also had the protective provision that the seller warranted as of the time of closing, there were no violations of “land use plans, zoning, restrictions, prohibitions and other requirements imposed by governmental authority ….”

Mr. Plezia did not have the property inspected before closing. (He had bought real estate before without home inspections and never had a problem.) There was no confirmation given to him that the modular building was a residence.

The deal closed. The title was transferred. Months passed.

Then, Mr. Plezia discovered water leaks; they got worse as Florida’s rainy season hit. Black mold popped up on walls; it had been painted over and erupted in the humidity. He got an inspection. From the inspection, he discovered that the two-bedroom home wasn’t a modular residence. It was a large storage shed that had been coverted to a dwelling without anyone making sure that the renovation met zoning laws, or building codes. No one got a building permit before the changes were made.

So, the new owner sued for fraudulent misrepresentation; breach of contract warranty; and asked for damages as well as rescission of the deal, based in part on the landmark case of Johnson v. Davis, 480 So.2d 625 (Fla.1985).

The seller defended herself by arguing that the buyer could have had an inspection before closing but chose not to do so. In sum, she argued that the buyer had failed to do his own due diligence before closing on the property, and if he had done so then all these complaints would have been made before the closing and he would not have incurred any damages. She also denied that she had any “knowledge of any Building Code compliance issues, any roof leaks, mold infestation or any other alleged defects” of the property.

At first, the trial court agreed with the seller and entered a summary judgment for her; however, the buyer appealed and the reviewing court determined that there were genuine issues of material fact on whether or not the buyer had been a victim of fraudulent misrepresentation.

Specifically, even if he had failed to inspect the place before closing, there was a question whether or not the seller or her agents had misrepresented to the buyer:

1) the very nature of the structure in question (i.e., a genuine residence built to those standards applying to residences, as opposed to a storage shed converted to a “residence” and not complying with such standards); and
2) whether the structure complied with various governmental laws and regulations.

The reviewing court returned the controversy for trial, leaving the parties to decide if they could resolve the dispute in settlement negotiations or try the case for a jury’s determination of justice.

Does The Failure to Inspect Prevent a Buyer From Making a Claim After Closing Against The Seller ?

Having an inspection of property before closing on a Florida real estate purchase is always a good idea. Trained professionals going through a property with an expert eye can expose all sorts of things that the buyer may not know exist and save that buyer lots of headaches (and expense) down the road. Moreover, having a buyer doing more than a quick walk-through of the property before spending money in a land purchase can help that buyer later. Taking pictures, and having the support and guidance of an experienced Florida real estate lawyer before closing is completed (as well as requesting and causing a real estate contract to be contingent upon a seller delivering a property disclosure statement) can protect the purchaser in all sorts of ways.

However, if a buyer doesn’t conduct inspections – or doesn’t visit the property before closing — it doesn’t mean that the buyer will not be able to pursue legal claims after closing, especially if they discover a hidden defect or problem with the home. Making a claim may be more difficult, but a Florida real estate attorney can work with a buyer to evaluate their situation to determine what claims and causes of action (like fraudulent misrepresentation) that they may have under Florida law against the seller as well as the seller’s real estate agent representatives.

A good piece of advice when you and your family are purchasing or selling your family home in one of the biggest transactions of your life is to at least talk with a Florida real estate lawyer. Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.

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Picture of Larry Tolchinsky

Do you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.

 
 
 
 
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