Tuesday, December 11, 2018

Florida Makes Effort to Protect Home Buyers

LAW MATTERS

Florida’s legislature has gone out of its way to mandate disclosure to buyers of residential real estate. Many statutes presuppose that buyers cannot or will not investigate a property on their own and must be warned or offered written information from the seller. Florida courts have also created protection in addition to that provided by the legislature.

Perhaps the most important protection is inherited from the Common Law of England. Under what is known as the statute of frauds, codified at Section 725.01 Florida Statutes, any contract for the sale of real property or a lease for a period longer than one year must be in writing and signed by the party responsible for performance. Two reasons have been historically given for the statute of frauds. One is that parties reducing an agreement to writing take the agreement more seriously. The other is that the written contract helps to avoid dispute and possible fraud when a party lies about the terms of an oral agreement. Scholars question whether either purpose is actually achieved by the statute of frauds.

Section 475.278 Florida Statutes describes duties of brokers and limits the type of real estate brokerage relationship for Florida real estate. A broker can be:

  1. A single agent working for only a buyer or seller.
  2. A transaction broker providing limited representation to a buyer, seller or both.
  3. No brokerage relationship with either party.

It is presumed that all licensees are operating as transaction brokers unless a single agent or no brokerage relationship is established, in writing, with a customer. That means disclosure is required unless the broker is acting as a transaction broker.

A transaction broker has the following duties with respect to representation:

a. Dealing honestly and fairly.

b.   Accounting for all funds.

c.  Using skill, care and diligence.

d.  Disclosing all known facts that materially affect the value of the property that are not readily observable by the buyer.

e.  Presenting all offers and counter offers in a timely manner, unless previously directed otherwise.

f. Limited confidentiality unless waived by a party.

Single agency adds additional duties of loyalty, complete confidentiality as opposed to limited confidentiality, obedience and full disclosure, in addition to disclosure of facts that materially affect the value. If there is no brokerage relationship, the brokerage required duties are limited by statute to dealing honestly and fairly, disclosing all known facts that materially affect value that are not readily observable and accounting for all funds.

Requiring a written contract and providing statutory duties for brokerage relationships are not the end of the legislature’s protection. The legislature also requires a variety of disclosures in residential sale contracts.

Section 689.261 Florida Statutes mandates residential sale contracts include a warning that the buyer should not rely on the seller’s current property taxes as the amount of property taxes that the buyer may be obligated to pay in a year after closing. The mandated language also warns the buyer that a change of ownership or property improvement can trigger reassessment and increase taxes. That language is due in no small part to Florida’s statutory property tax limitations on increase in assessed value and property taxes for both homestead and other property.

The legislature is also concerned with radon gas. Radon is a natural occurring radioactive gas that emanates from building materials or the land itself. It cannot be seen. Most states require some type of disclosure or warning concerning radon. Section 404.056 Florida Statutes requires notification in at least one document at time of or prior to contract for sale and purchase of any building or execution of a rental agreement for any building warning that radon gas is naturally occurring, may accumulate in a building and may present health risks when present in sufficient quantities. The warning must also disclose that levels of radon that exceed federal and State guidelines have been found in buildings in Florida and that additional information regarding radon and radon testing may be obtained from the County Health Department. The warning is not required for rentals when occupancy is 45 days or less.

Florida has 8,436 miles of shoreline according to the NOAA office for Coastal Management, which is second only to Alaska’s 33,904 miles. That got the legislature’s attention and the legislature found it is “necessary to ensure that purchasers of interests in real property located in coastal areas partially or totally seaward of the coastal construction control line are fully apprised of the character and of the regulation of the real property in such coastal areas.” Section 161.57 Florida Statutes mandates that sellers of real property located partially or totally seaward of the coastal construction control line give a written disclosure statement in a required form to prospective purchasers. The disclosure may be in the contract or in a separate writing. Unless waived in writing by the purchaser, the seller must also provide the purchaser an affidavit or a survey showing location of the coastal construction control line on the property. The statute limits this protection as it goes on to state that the failure of the seller to comply with the statute does not impair the enforceability of the contract, create any right of rescission by the purchaser or impair title to the real property conveyed by the seller to the purchaser.



Property in condominium and homeowners associations gets extra special treatment from the legislature. The legislature started with developers and after years of experience with developer disclosure, someone decided it would be good for non-developer or private sellers to also disclose. The disclosure requirements are now codified at Section 718.503 Florida Statutes. Developers must file a substantial list of documents and get approval from the Division of Florida Condominiums, Timeshares and Mobile Homes before selling residential condominiums. Developers must provide buyers with a huge pile of documents and disclosures after which a buyer will have a 15- day voidability period.

Non-developers do not have to file anything with the State, but contracts must include notice of a buyer’s right to obtain certain documents from the seller, including the declaration of Condominium and financials. The buyer has 3 days after receipt of all pertinent documents within which to terminate the contract and obtain refund of deposit.

After experience with condominium disclosure, someone in the legislature decided that disclosure was also needed for buyers in homeowners associations. The legislature adopted what is now Section 720.401 Florida Statutes. That statute requires all contracts for sale of property governed by covenants under which a homeowners association (which differs from a condominium association) has authority to mandate payment of assessments that are enforceable by lien notify the buyer that the contract is voidable by the buyer within three days after the buyer receives a disclosure summary. Content and form of the disclosure summary is provided in the statute. The disclosure summary provides the buyer with information concerning assessments payable to the homeowners association. Developers and private sellers must both provide the same disclosure.

Perhaps the most important protection for buyers was provided by the Florida Supreme Court in the 1985 case of Johnson v. Davis. Davises contracted to buy the Johnson’s home for $310,000. The Davises noted buckling and peeling plaster around the corner of a window frame and made inquiry. Mr. Johnson told Mr. Davis that the window had a minor problem that had long since been corrected. Several days later, following heavy rain, Mrs. Davis entered the home and found water “gushing” in around the window frame, the ceiling, light fixture, doors and stove in the kitchen.

The Davises filed a complaint alleging breach of contract, fraud and misrepresentation. The case made its way to the Florida Supreme Court and the Court ruled that the doctrine of caveat emptor (let the buyer beware) would no longer apply in residential real estate sales. Sellers now have a duty to disclose to buyers material defects that are not readily observable or known to the buyer in residential sales.

None of these protections insure a buyer a good deal or that there will not be any problems. But, the statutes and judicial protections are of significant benefit to residential purchasers.

William G. Morris is the principal of William G. Morris, P.A. William G. Morris and his firm have represented clients in Collier County for over 30 years. His practice includes litigation and divorce, business law, estate planning, associations and real estate. The information in this column is general in nature and not intended as legal advice.

One response to “Florida Makes Effort to Protect Home Buyers”

  1. David Brewer says:

    This article is accurate as far as I can tell. Much of, if not most it can be found in the FAR-BAR contract forms used by most Florida Realtors. As a Florida Realtor of 40+ years, the point of view that I have never understood is why politicians in general and legislators in particular believe their constituants lack the intellegence to make their own decisions. With the exception of the required disclosure of detriments to value that are not readily observable, I find the other disclosures to be an insult to the average buyer.

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