Consider these facts:
You are a buyer of residential property here in South Florida. Maybe it’s a condo. Maybe it’s a home in a nice gated community. Maybe it’s a townhouse near the university, or in a retirement community. Things look great until after closing, and then you realize that something is not right.
You think that things were misrepresented to you by the seller or the seller’s real estate agent. You believe you may have been the victim of fraud.
What can you do? Well, you can proceed with a lawsuit against that seller or the real estate agent (and their broker) for any financial damages that resulted from their fraudulent conduct. They’ll defend their actions, of course. No one lays down when they’re threatened with a lawsuit — well, almost never.
Unfortunately, litigation can be tricky and uncertain. Depending on the facts of the case, the defendants may try a legal tactic during the litigation; they may move for a “summary judgment” — meaning, the buyer’s lawsuit should be dismissed as a matter of law because there are no disputed facts. If they can convince (using testimony, affidavits and documents related to the transaction) a judge of their argument, then the judge will enter a judgment in their favor where the case is closed and the buyer’s claim fails.
The Case of Woodson and Martin and the “Economic Loss Rule” – Contract Law vs Tort Law
In the case of Woodson v. Martin, the Florida Supreme Court answered the question of whether or not a residential real estate buyer can recover damages from the seller’s real estate agent based upon fraud, specifically, “fraud in the inducement” — or if the agent could block the buyer’s recovery as a matter of law via a “summary judgment.”
In Woodson, a buyer named Kirk Woodson and his wife bought what they thought to be a very nice, almost new, and expensive home from seller Wilma Martin. Wilma was represented by MacLean Realty in the deal.
After the deal closed and the Woodsons moved in, they found what they considered to be “numerous serious defects” in the home. Defects that they believed the seller and her agents misrepresented to them before the deal was completed; misrepresentations that were acted upon by the Woodsons in making the decision to buy the house. (The case doesn’t give us the details on what these defects were, just that they were “serious” and that there were lots of them.)
So, the buyer filed a lawsuit, which he lost. He lost both at the lower court and on appeal all the way up to the Florida Supreme Court. Why?
The trial court granted the seller’s motion for summary judgment, as well as the the realty’s motion for summary judgment, on the buyer’s fraud in the inducement claim. The reviewing courts found that the trial judge’s ruling was correct, because his decision was based upon law that was established in the Florida Supreme Court case of Casa Clara Condominium Ass’n v. Charley Toppino & Sons, Inc., 620 So.2d 1244 (Fla. 1993).
The trial judge issued the judgment based upon law and the type of claim brought by the buyer.
In that case, it was determined that a buyer of residential real estate in Florida cannot recover fraud damages because of the “Economic Loss Rule.” Homeowners would not be given an exception to the general rule in Florida that if there is no claim of damage to the property, nor any claim of anyone being hurt (personal injury), then there’s not going to be any “economic damages” for the homeowner to recover.
In other words, if a Florida homeowner suffered damages for things like diminished value, repair costs, the replacement of a defective product, or lost profits, then those damages aren’t going to be recoverable in a lawsuit based upon fraud.
The homeowner has to have evidence of damage to the property or personal injury resulting from the property to win on a fraud allegation. Florida tort law here does not cover what are called “economic losses” or “disappointed economic expectations.”
What is a Summary Judgment under the Economic Loss Rule?
A summary judgment is a procedural tool that defendants can use to end a case against them quickly, and in their favor. A request is made that the judge enter a judgment for them “summarily,” before the case has spent much in time and money, because as a matter of law the defendant wins. It doesn’t matter what facts the plaintiff can show, the law is in the defendant’s favor.
In economic loss cases, the seller’s real estate agent can argue that as a matter of law, the plaintiff buyer cannot win. Judgment should be entered in the defendant’s favor because Florida law does not allow damages based upon fraud that are “disappointed economic expectations.” Even if the buyer can prove there was a misrepresentation, the buyer will still lose his fraud claim to a summary judgment in this situation.
Florida Real Estate Law: Contract and Tort
Bottom line, buyers of residential real estate are better protected if they have a real estate lawyer on their side to protect them before they sign any contract, much less close on a home or condo. Reading over contract provisions may be important to make sure that the buyers have protection just in case they discover a misrepresentation was made to them after they’ve closed and moved in. Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation to answer your questions.
Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at info@hallandalelaw.com, or (954) 458-8655. If you have a specific or personal situation, please call or email Larry because he can’t answer specific fact questions in general comments.
