When it comes to residential purchase-sale contracts, sellers are required to disclose known defective items / facts that materially affect the value of the property. Such residential contracts routinely include language that the “Seller knows of no facts materially affecting the value of the Real Property which are not readily observable and which have not been disclosed to the Buyer.” If such fact is not disclosed to the buyer, the buyer may have what is commonly referred to as a fraudulent nondisclosure or concealment claim against the seller (former owner) or a Johnson v. Davis claim named after the Florida Supreme Court opinion that recognized fraudulent nondisclosure claims.
Many sellers try to hang their hat on the fact that the residential contract contains an “as is” provision such that they are selling the property “as is”. Certainly, this is good language. However, an “as is” provision in a residential purchase-sale contract will not waive the duty imposed on the seller to disclose known items / facts that materially affect the value of the property and which are not readily observable. Solorzano v. First Union Mortgage Corp., 896 So.2d 847, 849 (Fla. 4th DCA 2005).
A buyer (current owner) asserting a fraudulent nondisclosure claim against the seller (former owner) must prove four elements:
1. The seller must have knowledge of a defect [fact] in the property;
2. The defect [fact] must materially affect the value of the property;
3. the defect [fact] must be not readily observable and must be unknown to the buyer;
4. the buyer must establish that the seller failed to disclose the defect to the buyer.
Jensen v. Bailey, 76 So.3d 980, 983 (Fla. 2d DCA 2012).
The first element, “the seller must have knowledge of a defect” is the most challenging for the buyer to prove because the burden requires the buyer to “prove the seller’s actual knowledge of an undisclosed material defect.” See Jensen, 76 So.3d at 983; accord Eiman v. Sullivan, 173 So.3d 994 (Fla. 2d DCA 2015). Keep in mind, though, that this element does not require the buyer to prove the seller’s intent, only that the seller knew of a defect / fact that materially affected the value of the property and failed to disclose the defect / fact to the buyer. To prove actual knowledge, the buyer may need to put on circumstantial evidence establishing the seller knew of the defect / fact (but is perhaps lying about his or her actual knowledge today). See Jensen, 76 So.3d 980; see also Bowman v. Barker, 172 So.3d 1013, 1016 (Fla. 1st DCA 2015) (“This evidence raises a question of fact about the appellees’ [seller] knowledge, as well as questions about their credibility and the plausibility of their denying knowledge of the property’s substantial defects and what repairs it needed.”) (For more on this case, click here.)
If you believe you have a fraudulent nondisclosure claim, consult a lawyer that can best assist you in (a) proving your claim based on the required elements and (b) understanding your damages associated with the nondisclosure. Typically, this will require engaging an expert to testify as to the costs to repair the undisclosed defect(s) / fact(s) that materially impacts the value of the property.
Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.