Last Update: 04/18/16
Here in South Florida, flooding is a big problem — something that buyers and investors from other states or other countries may not experience. Not only do we have the threat of hurricanes swooping in with tons of water, there is also the factor that parts of our state are wetlands and marshes: the Everglades cover most of South Florida, for example. Our terrain invites flooding in ways that other land masses do not; and when there are thunderstorms with heavy rains here in Miami-Dade, Broward, and Palm Beach Counties, there’s always a possibility of flash flooding, too.
Which means, that anyone considering buying a home or condo in South Florida needs to know about the risks and dangers of flooding and how to prepare for those conditions. Flood insurance is one way to prepare for floods, for example. But how can you prepare when you’re not even aware of the problem?
The Case of the Home Buyer Whose New Property Floods
In the case of Wassall v. Payne, 682 So. 2d 678 (Fla. Dist. Ct. App. 1996), Dorothy Frazier bought real estate from W.H. Payne with Dean Highfield acting as the real estate broker. A day after Mrs. Frazier closed on the deal, Richard Wassall leased the property from her. Under the lease terms, Wassall would pay the monthly payments to Payne for the purchase. Wassall was involved in the negotiations to buy the real estate; in fact, at one point he was the buyer and not Frazier.
During the closing process, Wassall asked about flooding dangers to the property. Both the seller and the broker told him not to worry and the deal was finalized.
Wassall moved forward after closing and started spending money on improvements to the property — until he discovered that the property was at risk for periodic flooding.
So, Mr. Wassall filed a lawsuit together with Mrs. Frazier. Specifically, Wassall and Frazier sued both the seller and the real estate broker for (1) fraudulent misrepresentation, (2) negligent misrepresentation and (3) negligence per se.
The seller and the broker argued first that Wassall couldn’t sue them — he was a tenant!
Upon review, it was held that the “privity” argument could not fly. Meaning, as long as Wassall was a victim of misrepresentation by the seller and the broker, then the fact that Wasall had no contract with them wasn’t going to prevent Wasall from proceeding with his misrepresentation case (he wasn’t suing for breach of contract).
Both the real estate broker and the seller could be held liable for misrepresenting the flooding characteristics of the property and if it could be shown that they did so intentionally, not by an error or omission, then they could be held liable for fraud — fraudulent misrepresentation.
What is Fraudulent Misrepresentation by a Florida Real Estate Broker?
What makes fraudulent misrepresentation different from negligent misrepresentation is the intent of the person who makes the representation. When a real estate professional makes a mistake, for instance if the agent provides the wrong square footage in an MLS listing, then the buyer may have a claim for damages based upon an unintentional error (the agent didn’t intentionally make a fraudulent statement). A mistake can be grounds for a negligence claim – the agent or broker made an error (by not investigating or by not verifying information) when representing the details about the property during the sales negotiations or closing process.
However, fraudulent misrepresentation is a different story.
In these situations, the real estate professional or seller knows the truth about the property and chooses to misrepresent a condition in order to close the deal. Maybe it’s an exaggeration. Maybe it’s an omission. Maybe they think it’s okay not to tell the buyer everything, or maybe they think it’s not that big of a deal so why bother sharing it.
Whatever the motivation behind the seller or the real estate broker (or agent) failing to be forthright, if the buyer is hurt because of their behavior, their knowledge of a circumstance that materially impacts the value of the property that they fail to disclose or intentionally misrepresent can be the basis of a fraudulent misrepresentation claim.
And, damages for fraud are different than damages for negligence: it’s possible that the buyer can receive additional damages against a defendant found guilty of intentional misconduct. Moreover, “errors and omissions” insurance (lots of real estate agents carry this type of insurance) does not cover fraudulent acts; those insurance policies only cover mistakes.
What Are The Elements of a Fraudulent Misrepresentation Claim?
In Florida, a “fraudulent misrepresentation” lawsuit can be filed against a real estate broker (or a real estate agent or seller) if the following elements are present:
(1) there was a false statement concerning a material fact;
(2) the broker or agent’s knowledge that the representation is false;
(3) an intention on the part of that broker that the representation induce the buyer to act on it; and,
(4) consequent injury (damage) by the buyer acting in reliance on the representation.
See – Johnson v. Davis, 480 So.2d 625, 627 (Fla. 1985).
Are You The Victim of a Fraudulent Misrepresentation and Your Home is Flooding?
If you recently purchased Florida real estate and your property was materially damaged by a flood, and a real estate agent intentionally made untrue representations about the flood conditions of the property, then you may want to have someone review your claim for possible wrongdoing. An experienced Florida real estate attorney can help you explore your options, including filing an insurance claim, and, if necessary, filing a lawsuit for you to get justice. Most real estate attorneys, like our office, do not charge for an initial consultation.
A good piece of advice is to at least speak with an experienced Florida real estate lawyer to learn about your rights. 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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