Last Update: 02/22/16
Broker Misrepresentation Claims and “As Is” Clauses
Here in South Florida, the condominium lifestyle is very popular. That popularity extends to both retirees as well as to locals, who buy condos as primary residences, vacation homes and as investment properties. People from other countries also flock to South Florida’s condo haven because of our near perfect weather, our great food and to be a part of our ever evolving melting pot of people.
However, the allure of South Florida doesn’t mean that potential buyers should not be aware of their obligation to investigate, before closing, any condominium they intend to buy to make sure that everything is okay with the property. This is especially true with Florida’s humid climate. Since we are located between the Atlantic Ocean and the Gulf of Mexico, mold can be a real problem here. Also, with all of our rain it is a must to closely inspect doors, roofs, and windows for water leaks and other water related issues.
Water damage can be an easy repair or a major financial expense. It can even become a health hazard (mold) if left undiscovered for a long enough period of time.
Buyers of Florida condos should also know that there are Florida laws in place that protects them from hidden defects (defects that the seller knew about or should have know about) like water leaks and other water related issues. Buyers should also know that any claim they may have not only extends to the seller but also extends to the real estate agent and their real estate broker. See, Johnson v. Davis, 480 So.2d 625 (Fla. 1985) and Florida Statute 689.261.
What Happens If There Is An “As Is” Sales Agreement?
Selling a condo “as is” does not protect the seller against a water damage hidden defect claim, as the buyers learned in the case of Syvrud v. Today Real Estate, Inc., 858 So.2d 1125, 1130 (Fla.App. 2003).
Here, a beautiful Florida condo was sold by Mr. & Mrs. Cummings to Mr. & Mrs. Syvrud in the Nature’s Watch condo development located in Pinellas County, Florida. The buyers and the sellers signed a written agreement for the sale and purchase of the property. They used the 2001 form agreement that was created and approved by both the Florida Bar Association (the group that regulates Florida lawyers), and the real estate professionals’ organization, the Florida Association of Realtors. (The form real estate agreement is known as a “FAR/BAR Contract.”)
However, the FAR/BAR Contract didn’t include all of the terms of their agreement. The parties added additional terms to the standard language. They did this in an Addendum to the agreement, which they had typed up and they all signed. The key to the addendum was that they made the transaction into an “as is” purchase.
Notwithstanding the fact the property was being purchased as it, the buyers did receive a Disclosure Statement from the sellers, but it did not reveal any hidden defects much less anything else that might materially affect the condo. After the deal was closed, the buyers discovered mildew damage; damage from leaking water; cracks in the structure of the condo itself; and other structural defects. These defects weren’t limited to this single condo unit; they were massive and impacted lots of the units.
It ended up that the buyers were facing condominium assessments of $20,000+ per condo unit due to these hidden defects. This was a serious problem.
And, it was a problem that the buyers alleged the sellers and the brokers knew about before the buyers closed the transaction. The buyers provided evidence that included 6 letters that were sent over a period of several months and almost a year before the closing date. The letters were sent to the condo owners by the condo association. They went into detail about the problems in the condominium project. They discussed the condo association expending money to do things like hire an architect, a contractor, an engineer, a roofing consulting. They also went into detail on how the unit owners were going to be facing huge assessments because of the repairs that had to be done due to the water damage.
Result: There was plenty of evidence that revealed these weren’t defects that the seller wasn’t aware of – same for the real estate professionals. They were hidden defects only to the buyers until after the deal closed and they had taken title to the property.
Did the Buyers Sue the Sellers and the Real Estate Brokers?
Of course they did. The buyers sued the listing broker; the selling broker; and the sellers for damages based upon breach of contract and misrepresentation of the condition of the condo prior to closing.
The court held that the addendum to the contract did NOT relieve ReMax as the Listing Broker from the duty to let the buyers know about the mold. The seller’s broker and the sellers also had a legal duty to reveal the water damage to the buyers.
Furthermore, did the typed addendum that was added to the sales contract help the seller and the real estate sales people? The court found that the language was an attempt to create an “as is” contract; the sellers wanted the buyers to purchase the property with the risk that there may be problems with the property which the buyer will have to handle on their own.
However, as the court pointed out, there can be no waiver of the legal duty to reveal hidden defects in a residential property to buyers in Florida. This issue had already been decided in the case of Johnson v. Davis.
The addendum failed as a matter of law to prevent the sellers from selling it “as is” to an unknowing buyer and it failed to allow the seller to escape the financial burden of the water damage. The bottom line: “as is” doesn’t mean you don’t have to disclose.
Are You a Victim of Fraudulent Misrepresentation?
If you have been the victim of misrepresentation involving hidden defects by a Seller, a Florida real estate broker or real estate agent, then you may have a claim for damages available to you under Florida law. An experienced Florida real estate attorney, like Larry Tolchinsky, can investigate the facts and talk with the parties involved, including reviewing the contract, the disclosure statement, and the closing documents, to determine if a settlement is likely or whether it will be necessary to file a lawsuit to get you the justice you deserve. 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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