Last Update: 4/14/21
In Florida, in order to have a binding contract to purchase real estate, both the buyer and seller must sign a written agreement that includes the material terms of the deal (price, closing date, description of the property, financing, etc.). That contract controls the transaction and it spells out the parties’ obligation to one another and to get the deal closed. If the seller fails to perform his/her duties under the agreement or fails to disclose material information about the property, then he/she may end up being sued for breaching the contract or for fraud for failing to disclose information about the property (to address the issue of non-disclosure, a buyer should require the seller to provide a seller disclosure statement at or near the time of signing the contract).
Breach of Contract Lawsuits Between Buyers and Sellers
In Florida, standard real estate contracts provide a remedy when there is a breach (or default) of the contract by either the seller or buyer. The language usually states that a dispute will be settled by mediating the claim or controversy. If the issue cannot be resolved at mediation, then the parties are free to file a lawsuit in the county in which the property resides.
Read: What Happens When A Seller Defaults on a Real Estate Contract
A common example of a breach of contract claim is if the seller refuses to return or release the deposit to the buyer after the buyer properly cancels the deal. Another example: if the parties get to the closing table and the seller has failed to fix the air conditioning unit or repair the swimming pool as required under the contract.
Unfortunately, there are times when the dispute is more serious than a simple breach of contract claim. Sometimes, the seller commits an intentional act or a FRAUD on the buyer.
Fraud is a “tort” under Florida law and tort claims allow different kinds of damages to be awarded to the injured party than in a breach of contract case. In fraud cases, for instance, a defendant may end up be held liable for “exemplary” or “punishment” damages — something that is not available in a contract action.
Fraud by the Seller in a Residential Real Estate Transaction
Many sellers may not realize that keeping their mouths shut can end up costing them a lot of money in damages and attorney’s fees. That’s because in a residential real estate transaction, Florida law requires the seller to disclose material information the seller knows about the property with the buyer.
If the seller intentionally conceals important information about the property from the buyer, then he/she may be committing fraud. If the buyer is harmed as a result of the seller’s silence, then that buyer may be able to sue the seller for damages or to have the transaction canceled.
How can a buyer successfully prevail in a claim for fraud against a seller that failed to tell the buyer material information about the property? The answer is when the buyer can, using admissible evidence, prove each and every element of a fraud claim. (Please note, not every case of a seller’s silence about an issue concerning the home or condo will be successful – these are not easy cases to win.)
4 Elements Needed to Prove Seller’s Fraud by Omission
In order for a buyer of Florida residential property to prove that he or she has been the victim of fraud based upon a seller’s concealment of material information, the buyer must be able to prove specific facts that establish the fraud.
These four facts are:
(1) the seller of a home must have knowledge of a defect in the property;
(2) the defect must materially affect the value of the property;
(3) the defect must be not readily observable and must be unknown to the buyer; and
(4) the buyer must establish that the seller failed to disclose the defect to the buyer.
See, Jensen v. Bailey, 76 So. 3d 980 (Fla. Dist. Ct. App. 2011); Johnson v. Davis, 480 So.2d 625 (Fla.1985).
Does the Seller have a Legal Duty To Share Material Information with the Buyer?
In Florida, when someone is selling a home, condo, or other piece of residential property, certain legal duties are placed upon them in order to insure fair dealing with the buyer. These are legal duties that are defined outside of the sales contract. In Florida, if the seller knows of information that will materially impact the market value of the property, and it’s not known to the buyer, then the seller is required to disclose that information to the buyer.
If the seller fails to share the material information with the buyer, and this usually happens because the seller is afraid that the buyer will walk the deal or want to renegotiate down the purchase price, then the seller puts him or herself in the position of being sued for the legal claim of fraudulent concealment. This can leave the seller exposed to a lot more financial liability than a breach of contract action. See, In re Osborne, 455 B.R. 247 (Bankr. M.D. Fla. 2010) (applying Florida law).
Is a Seller Liable For Everything They Hide From a Buyer?
Under Florida law, a Seller will not be held liable for everything he/she fails to disclose to a buyer. Only “material” misrepresentations will support a fraud claim.
Additionally, the damage to the value of the property must be proven; it can’t be speculative or subjective.
Example of Fraudulent Concealment
As stated above, the omissions have to be “material” and significantly impact the value of the property. For instance, if the seller fails to disclose to the buyer that the condo had suffered a lot of water damage from a leak and that the condominium has mold, then the buyer likely has a fraud claim. This is a material misrepresentation with a distinct impact on the condo’s market value that can be established and quantified. See, Postregna v. Tanner, 903 So. 2d 219 (Fla. 2d DCA 2005).
Patching Up Cracks to Hide Foundation Problems
Another example: if the seller patches up cracks in the property so the buyer can’t see, for example, a crack in the foundation or in the swimming pool, then the buyer likely has a fraud claim against the seller. Here, the buyer may sue for fraudulent concealment when he or she discovers the home has foundation problems and the pool is cracking — even if it’s long after he or she has left the closing table. See, U.S. Home Corp., Rutenberg Homes Div. v. Metropolitan Property and Liability Ins. Co., 516 So. 2d 3 (Fla. 2d DCA 1987).
Can a Seller’s Broker May Be Liable for Fraudulent Concealment?
In today’s marketplace, most sellers let their real estate professionals speak for them — they show the home or condo to prospective buyers, they answer the buyer’s questions, they have the opportunity to disclose material information to the buyer much more often than the actual property owner.
So, if the real estate broker is the party who is responsible for intentionally hiding that material information from the buyer, then is the seller free from being responsible here? Can the seller avoid being sued for fraudulent concealment just because the seller can point his/her finger to the real estate broker (and an agent) who had direct communications with the buyer?
No. The seller is the party who signed the Sales Contract. While the real estate broker (and their agent) may be liable for fraud damages (and may be included in the buyer’s fraud damage claims), the seller cannot escape legal responsibility for intentionally failing to share material information about their home or condo just because he/she has hired a professional to help get it sold. If the seller intentionally kept material information secret from the buyer (like mold in the condo walls), then the seller is liable for that bad act even if he or she had a real estate broker representing them in the deal.
Are You a Victim of Fraud By a Seller or Realtor?
If you are concerned about a recent Florida residential real estate transaction and suspect that the seller hid some vital information about the property from you, then you may have a fraud claim against the seller. An experienced Florida real estate lawyer can help you assess the situation to determine if the facts in your circumstances will meet the legal elements for a fraudulent concealment case under Florida law.
A good piece of advice if you are involved in a real estate transaction where the seller or realtor has concealed material information or has made materially untrue statements, 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. (Please note, we do not take these cases on a contingency basis.)
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Thank you Larry for this valuable information. As a florida real estate agent I need this knowledge to not only protect my clients but also me.