Court Reaffirms Broker and Agent Liability For Misrepresentations

In a decision rendered by the Florida Second District Court of Appeal on October 31, 2003, the Court in Syvrud v. Today Real Estate, Inc., 28 Fla.L.Weekly D2505, reiterated the respective duties of sellers and their representatives in regard to the sale of residential property. In particular, the Court held that an “as is” clause in a contract for the sale of residential real property does not waive the duty imposed by Johnson v. Davis to disclose hidden defects which materially affect the value of the property.

In Johnson v. Davis, 480 So.2d 625 (Fla. 1985) the Florida Supreme Court denounced the ancient concept of “Let the Buyer Beware” as related to residential real estate, and declared the law in Florida to be:

“Where the seller of a home knows of facts materially affecting the value of property which are not readily observable and are not known to the buyer, the seller is under a duty to disclose them to the buyer. This duty is equally applicable to all forms of real property, new and used.”

Following the Florida Supreme Court’s decision in Johnson v. Davis, the Florida Third District Court of Appeal in Revitz v. Terrell, 572 So.2d 996 (Fla. 3rd DCA 1990) held that a real estate broker could be held liable for the failure to disclose to the Buyer that the subject structure was in a FEMA Flood Zone and that the ground floor living area was built in violation of local building codes. The Court suggested that a real estate agent may be held liable for nondisclosure or misrepresentation even if the agent did not have actual knowledge of the legal status of the structure, but based upon the circumstances, should have known that the structure was non-conforming.

The Court in the recent decision in Syvrud v. Today Real Estate, Inc. emphasized that the duty of disclosure announced by the Florida Supreme Court in Johnson v. Davis extends to a seller’s real estate broker, and that a seller’s broker may also be liable to a buyer on the theories of negligence and fraudulent misrepresentation.

Under Florida law, a real estate broker or agent may be held liable for damages under a theory of fraudulent misrepresentation when the broker or agent makes a material false representation without knowledge of its truth or falsity. Young v. Johnson, 538 So.2d 1387 (Fla. 2nd DCA 1989).

With respect to waterfront property, there are way too many issues that may materially affect the value of property to enable a Broker or Agent to correctly inform Buyers about the status of the property. Frequently there are FEMA concerns, questions regarding the legality of existing structures such as docks or seawalls, the suitability of the property for development or redevelopment under coastal construction regulations or the extent to which mangroves or other wetland plants may be altered.

Thus, to avoid potential liability, Brokers and Agents should resist the temptation of offering answers regarding the legal status of waterfront properties. Buyers and Sellers must assume the burden of establishing the factual and legal status of waterfront property.

To accomplish this important task, Sarasota environmental and waterfront closing attorney David M. Levin has prepared a very valuable tool; a two part Checklist entitled, “What Every Waterfront Property Owner Should Know”. Part 1 contains a comprehensive list of questions which should be answered to ascertain the condition of property in relation to applicable FEMA regulations. The questions are to be answered by the Seller and/or appropriate public and private professionals to ascertain the legal status of existing structures.

Part 2 contains a comprehensive list of questions concerning a variety of environmental considerations. These too are to be answered by the Seller and/or appropriate public and private professionals.

The Checklists should be used by Sellers to assist them in the preparation of their disclosure statements and by Buyers to evaluate the completeness of the Seller’s disclosures.

A fully informed Buyer and Seller reduces the incidence of misrepresentation and nondisclosure. Informed Buyers and Sellers reduce the potential for conflict, and hence, reduce the potential for real estate broker and agent liability.

These Checklists were prepared as part of Mr. Levin’s continuing efforts to be of service to Buyers and Sellers of waterfront properties. They are available free of charge and can be obtained by contacting Mr. Levin at (941) 629-6319 or by e-mail at dlevin@icardmerrill.com.

It is recommended that the Checklists be used in conjunction with this website.

In the furtherance of his efforts to serve the community, you may be interested to know that Mr. Levin has recently expanded his practice to include waterfront property closings.