DISCLOSE! DISCLOSE! DISCLOSE!
In Florida, the seller must disclose all known facts that materially affect the value of a residential property and are not readily observable by the buyer. Fla. Stat. 475.278. Failure to disclose claims are the most expensive and time consuming issues agents and brokers will face.
Agents should always advise sellers to disclose.While written disclosures are not required by law, all buyers should request written disclosures before buying a property. The written disclosures should be current. If the disclosures are more than 6 months old, the buyer's agent should request a current disclosure from the seller. Agents representing sellers should always make sure the sellers complete the written disclosures themselves. Real estate agents should carefully review the disclosures to make certain that all questions are answered by the seller. As real estate agents, always remember that when the buyer discovers an issue that should have been disclosed, they will assert claims against the seller, their real estate agent, the seller's agent, and both brokerages. When reviewing the disclosures, if you find that a seller has failed to check one of the boxes ("yes" or "no") or to completely answer a question, make sure send an email to the seller asking about the specific question and have the seller fully complete the form.
Problems with disclosures often arise with investor owned properties.For example, as the seller, the investor completes the written disclosures, but fails to specify whether he is aware of any sinkholes on the property. Neither the seller's agent nor the buyer's agent realizes the seller's failure to fully complete the form. After closing on the property, the buyer discovers prior sinkhole issues with the property. Upon discovering those issues, the buyer asserted claims against the seller, both real estate agents and both brokerages.
Similar issues often arise with condominium units that have been recently renovated.According to some city inspectors, many contractors or owners fail to obtain permits for renovations in condominium units. As a result, proper inspections are not performed. The problems or issues may arise after the closing, when the buyer performs additional work done or an adjoining unit owner has work done that involves some of the common walls. The Florida Bar contract expressly requires the seller to represent that they are not aware of any open permits and they are not aware of any work performed on the property without a permit. These are affirmative representations in the purchase contract. Further, the written property disclosures also require information about permits. Once the buyer discovers that the work does not comply with current building code requirements, the buyer will see if permits were issued for the renovations. If the permits were never obtained for the renovations to the property, the buyer will have a claim against the seller, and in virtually every case, the seller's real estate agent and the brokerage will also be named in the lawsuit. While the agent and brokerage may ultimately not have liability because they did not have any notice, they will lose a significant amount of time and money defending against such a claim.
Best PracticesThe best practice in these situations is for the agent to pay attention to the surroundings. If you are listing a property that was built in the 80's or 90's, and it has recently been renovated, make sure you ask the seller about all renovations performed on the property. Ask the seller who performed the work and ask whether all permits were obtained. If the seller is not forthcoming with all information, be very wary. Make sure you advise the seller that in Florida, the law requires the seller to disclose all know facts that materially affect the value of the property, and let them know that the purchase contract and the disclosures both request information about permits. Encourage them to consult with a Florida real estate attorney. If the seller is still not forthcoming, you may want to reconsider taking the listing. While you may be receiving a nice commission on the sale, you will probably incur more in attorney's fees and in time spent addressing the failure to disclose or misrepresentation claim.