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Last Update: 8/9/20

People from all over the world come to Miami-Dade, Broward, and Palm Beach Counties looking for their piece of paradise. Snowbirds and people that are looking to relocate permanently love neighborhoods like Coconut Grove, Cityplace, Delray Beach, Weston, and Jupiter.


Skyline of Coconut Grove, Florida

Many of these people actually pull the trigger and purchase a home.  And, most of these deals go through without a hitch. However, there are always those problem files.

For instance, what happens when the property is damaged before the closing. Who bears the risk of loss before the transaction is completed? What does the contract say about this issue?

What Happens When There is Damage to Property Before a Residential Real Estate Closing in Florida

Some buyers automatically think if anything happens to the property before closing it is the seller’s problem. After all, the seller still has legal title according to the public records, right?

Surely, the owner is responsible if there is a fire, or a hurricane, or something as simple as a burst hot water heater that damages the carpet and flooring.

Maybe, maybe not. There is a lot of law in Florida related to the “liability of a vendor” both before and after closing in all sorts of situations, like where there is damage to:

  • The home or condo on the property before closing involving any type of unintentional harm;
  • The home or condo on the property after closing which involves the seller’s failure to disclose the thing that caused the damage;
  • The buyer or guest on the property who gets hurt because of a defective condition on the property;
  • Anyone (including a trespasser) who gets hurt because of a danger on the property, like a well or pool without protective housing around it.

Is The Buyer is Considered an Owner of the Real Estate?

We’ve discussed before how important the sales agreement is in a Florida residential real estate transaction: the agreement controls the deal. Not only does it define things like the warranties, but it also makes the buyer more than just a party to the transaction. Once the contract is signed by the parties, Florida law views the buyer as having a form of ownership in the real estate.

That’s right: when you sign a real estate contract to buy that condo in Hallandale Beach, you become an owner of sorts.

Specifically, Florida law provides that any buyer who signs a contract for the purchase of residential real estate is an “equitable owner” of that property. See, Huxford v. U.S., 299 F. Supp. 218 (N.D. Fla. 1969); Felt v. Morse, 80 Fla. 154, 85 So. 656 (1920); Insurance Co. of North America v. Erickson, 50 Fla. 419, 39 So. 495 (1905).

Equitable Ownership and Risk of Loss

As an equitable owner, the BUYER is liable for any loss to the home being purchased that happens between the time the sales contract is signed and the time when the deed and the keys are delivered to the buyer. Why? How is this fair?

Well, Florida law provides that a purchaser is the party who gets the benefit that may accrue to that property after the agreement is signed. For example, if the value of the condo skyrockets because the quarterback of the Miami Dolphins decides to buy a condo down the hall a week after the contract is signed, then the buyer gets that benefit, not the seller.

So, Florida law balances out the benefits that go to the buyer from the time of signing the real estate contract to closing by also placing the risk of any loss upon the buyer.

In Florida, Who Bears The Risk In A Residential Real Estate Transaction?

Many buyers and sellers are surprised to learn how Florida law allocates the risk of loss during the closing process involving residential real estate. Many people do not know that if the condo or home is damaged or even totally destroyed before the final closing, it’s not the seller’s problem under the law (unless the contract says otherwise).

In Florida, it’s the buyer’s headache — because he or she is the equitable title owner.

For instance, if there was a fire after the sales contract was signed and the condo is gutted, then the buyer may still be legally responsible for paying the seller the full purchase price as stated in their contract. The buyer has to pay the seller and the buyer has to deal with the fire damage.

This is longstanding law here in the State of Florida, a position that has withstood the test of time for over a century. See, Insurance Co. of North America v. Erickson, 50 Fla. 419, 39 So. 495 (1905).

Moreover, a residential buyer in Florida also takes on the risk that the value of the property may deteriorate, or fall, during the time period between signing the sales agreement and finalizing the deal at the closing table (Note: Most real estate contracts have an appraisal provision that allows a buyer to cancel the transaction if the property appraisal is insufficient – normally, this provision is only applicable to when a buyer is obtaining mortgage financing).

This allocation of the risk of loss to the buyer is the general rule of Florida real estate law. However, it’s not carved in stone (the parties can agree in writing to shift the risk of loss).

Protections for the Buyer From Risk of Loss

There are several ways that a purchaser in a Florida real estate transaction can protect themselves from financial loss before they take physical possession and legal title to the property. These include negotiation of the contract provisions as well as taking out insurance policies to cover the risk of loss.

1. Contracting Around Risk of Loss Before Final Closing on Residential Real Estate

So, what protections does the Florida residential real estate buyer usually take to avoid loss on the property before closing? Well, for one thing — there’s nothing in Florida law that prevents the purchaser from changing who bears the risk of loss during the closing process in the sales agreement itself (In Florida, most standard residential real estate contracts have a “Risk of Loss” provision that discusses who bears responsibility in the event of fire or other casualty) .

Contracts in Florida are subject to negotiation. Before a sales agreement is signed, either party can alter that document by inserting new provisions or omitting others. As long as the other party agrees and signs the paperwork, and it’s not flying in the face of Florida criminal or zoning laws, etc., then the contract’s unique language will be respected by the courts.

This is called the “freedom to contract” and a smart buyer will act accordingly regarding risk of loss. Inserting a contract provision into the sales contract that limits the buyer’s risk of loss in various ways is an important way for the purchaser to protect him or herself from being stuck with damaged property even before they get the keys.

2. Insurance Policies

Another tactic for the buyer: getting insurance. In Florida, both the buyer and the seller are viewed as having legal interests in the property that are insurable. Insurance companies will provide the buyer with coverage against the risk of loss between the time period covering (1) the execution of the sales agreement and (2) the final closing and transfer of formal title.

These insurance policies usually have language that limits their coverage in various ways, like voiding the coverage if the person in possession of the property is changed without the insurance company’s notice and consent.

3. Not Going Through With the Sale

If there is a loss to the property, then the purchaser may opt to refuse to go through with closing. Here, the buyer risks being liable for breach of contract damages in a civil lawsuit (again, this depends on the contract – some contracts only allow a seller to keep the deposit in the event of a default by the buyer) unless he or she can prove a legal basis for backing out of the deal.

This can include proving the loss was caused by the intentional misconduct of the seller. If the seller willfully caused the loss to happen, then he or she cannot benefit from his or her bad act and the buyer will be allowed to walk away from the deal. See, Open Permit Services of Florida, Inc. v. Curtiss, 15 So. 3d 822 (Fla. 3d DCA 2009).

4. Re-Negotiating the Deal

If there is a loss to the real estate after contract but before closing, and the buyer has the right to walk away, the parties can always agree to negotiate a new deal.

For instance, the buyer may waive his or her right to receive the property in a certain condition if the seller agrees to lower the price.

Risk of Loss and a Florida Real Estate Lawyer

Before anyone signs a real estate contract in Florida, it is wise to read through all of the provisions in the agreement. Don’t just rely on the realtor or lawyer. All that boilerplate language is inserted there for a reason.

A good piece of advice if you are faced with fire damage or other casualty before closing or you would like someone to make sure that all of your basis are covered before you sign the contract, is to 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.

Also, read: 19 Reasons To Hire a Real Estate Lawyer When Buying or Selling Florida Real Estate


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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