Buying or selling real estate here in Florida? If so, it is very important that you understand what all of those paragraphs in your sales contract mean to your purchase.
Why? In a Florida residential real estate transaction, the written sales contract will control the transaction. Anything that was said by or among the parties before the contract is signed will generally not be binding upon the Buyer or Seller (language to this effect is incorporated into most “standard” real estate contracts ). It doesn’t matter if the property is a single family home in a suburb or a condominium in a condo tower, or a town home or duplex. When dealing with the sale of real estate in Florida, the written signed agreement defines the rights and duties of the parties through closing (and afterward, in some situations).
For more on the power of that sales contract over the Florida home closing, read our earlier post.
Sellers and Buyers Need to Know Details of Their Real Estate Sales Contract
Which means, that buyers and sellers need to be aware of and understand the terms and conditions spelled out in the paragraphs of the contract — provisions like the property inspection contingency, the financing contingency, the title evidence standards and the warranties that are defined throughout the agreement. Warranties impact both sides in a Florida real estate transaction.
Warranties are there to help protect the buyer as well as helping the seller by defining what the seller is (and is NOT) warranting in the deal.
Residential Warranties Apply to New Construction, Too
What is a Warranty?
A warranty is a provision in the document that identifies both the type and the quality of the property — or component of that property — that is being transferred or sold. There can be warranties in the sale of goods, like cars, for example. There can also be warranties in a real estate sale. It’s a kind of promise or guarantee of sorts that things are really as they are presented and expected to be.
From the Legal Dictionary, a warranty is defined as“.. an assurance, promise, or guaranty by one party that a particular statement of fact is true and may be relied upon by the other party.”
Warranties can be spelled out in the document itself, for each party to read and agree upon as a contractual provision. There are also certain situations where Florida law will impose a warranty into a sales transaction. These exist even if they aren’t mentioned in the deal.
For instance there is a legal “warranty of merchantability” when you buy a product off a store shelf in Florida (here, the seller warrants by law that the product is fit for the purpose for which it is sold). There is also an “implied warranty of fitness and merchantability” in some Florida real estate transactions (more on that later).
Warranty Deeds
Most everyone recognizes a “warranty” in connection with the type of deed that will be transferred to the buyer in the sale. There are General Warranty Deeds and Special Warranty Deeds in Florida as well as deeds attempting to transfer title with no warrants at all (”as is” transactions with a “quit claim deed”).
General Warranty Deeds and Special Warranty Deeds in Florida transfer title of the property from the seller to the buyer. As part of that transfer, the seller (”grantor”) gives a guarantee (”warrants”) to the buyer (”grantee”) that he or she really does own and have legal title in the home or condo that is being sold and transferred.
The warranties associated with a deed, can form the basis of a later lawsuit brought by the buyer against the seller if there is a problem with the title to the property. Meaning, the buyer can sue under the warranty deed for damages resulting from a defect in title.
General Warranty Deeds have no limitation. Special Warranty Deeds limit that warranty period to a specific time frame, which is the time that the seller owned the property.
In a Special Warranty Deed, the seller guarantees clear title for the period of time that the seller was owner, period. In Florida, most lenders (who are acting as a seller) will provide a Special Warranty Deed in any residential real estate sale that involves an REO property in order to limit that lender’s exposure for past title problems (that happened before they got title in the foreclosure lawsuit). Usually, REO sellers won’t sell their property unless the buyer agrees to accept a Special Warranty Deed.
Two Kinds of Warranties: Express and Implied
Legally, there can be two kinds of warranties in Florida real estate transactions: “express warranties” and “implied warranties”. Express warranties are described and identified in the residential sales contract. Implied warranties are imposed by Florida statute or case law.
Which means that if there is a problem after closing, then you will need to check not only the document language but Florida law to see what warranty, if any, applies in your situation.
For instance, in the purchase of a new home the Florida residential buyer should know that Florida law has created an “implied warranty of fitness or habitability” by the builder of that new home (and the seller if there’s a developer or seller separate from the builder involved). The new home comes by law with a warranty that it’s fit for living and habitable. Even if the sales contract does not contain this promise to the buyer by the seller, the buyer is protected by law via this legally-imposed warranty.
Disclaimers of Warranties in Residential Real Estate Sales Contracts
However, savvy builders and developers are aware that Florida law allows them to disclaim legally imposed warranties in the sales documents. If the buyer agrees to the disclaimer, then the seller will be free from responsibility. This is not easily done, thankfully.
In order for a builder or seller to get around the Florida implied warranty of habitability of a residential property, several legal hurdles have to be jumped. These include:
(1) having a disclaimer written into the contract;
(2) which is written in clear wording that the buyer can easily understand;
(3) and which is not ambiguous language that might later be read in more than one way;
(4) each item that is not warranted must be identified;
(5) the understanding on the part of the seller must be clear that this item(s) is not being warranted; and
(6) the understanding on the part of the buyer must also be clear in the document that there is no warranty for this item(s).
This written disclaimer of a warranty in a residential real estate transaction must also be clear that any other kind of warranty over the item(s), or any alternative protection or warranty over that item(s) is being renounced by the parties. See, Gable v. Silver, 264 So. 2d 418 (Fla. 1972) and McGuire v. Ryland Group, Inc., 497 F. Supp. 2d 1347 (M.D. Fla. 2007), on reconsideration in part on other grounds, 497 F. Supp. 2d 1356 (M.D. Fla. 2007) (applying Florida law).
Remedy For Breach of Warranty
Under Florida law, if a seller breaches a warranty, like the implied warranty of habitability, then the buyer can file a lawsuit against the seller to recover his or her damages.
For example, if a buyer purchases a condo on Miami Beach, only to discover after he or she moves in that the condo’s central air conditioning does not adequately cool down the property, then he or she has a warranty claim against the seller because a latent defect (a hidden defect) caused a failure of the ac unit to meet ordinary, normal standards reasonably to be expected of a condo of comparable kind and quality.
And, the buyer still has a warranty claim against the seller of that real estate even if the seller tried to limit his or her exposure with an express warranty in the sales contract that tried to limit his guaranty to one year. See, Forte Towers South, Inc. v. Hill York Sales Corp., 312 So. 2d 512, 17 U.C.C. Rep. Serv. 78 (Fla. 3d DCA 1975).
Florida Lawyers Can Help with Warranties in Residential Real Estate Deals
In Florida, warranties protect buyers and they create duties for sellers. For buyers, warranties provides peace of mind and protection when making a big purchase such as buying real estate. For sellers, these warranties are needed assurances for getting their home or condo sold; however, the language of these warranties need to be clearly written so that the seller’s exposure is clear and each of the party understands their rights and obligations.
Some warranties are legally required. Some warranties can be negotiated. An experienced Florida real estate lawyer can help both sellers and buyers here to make sure the warranties in their residential real estate contract are clearly indicated and understood by the parties. Also, an experienced lawyer will know and share with the parties those warranties that are not written in the agreement, but that are implied in the law.
A good piece of advice if you are faced with a warranty issue, 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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