Most residential real estate transactions are governed by the “As Is” Residential Contract for Sale and Purchase, a form contract which has been approved by both the Florida Bar and the Florida Realtors association. This contract is typically referred to as the “FARBAR” contract by both attorneys and realtors.
The FARBAR contract undergoes changes on an almost yearly basis, making it important for buyers and sellers to either consult with an attorney before entering into a FARBAR contract or at least make sure that their realtor is using the most up to date version of the same. Changes are made to best reflect the current state of the laws governing the terms contract.
One portion of the FARBAR contract which has remained constant, however, and which is a major cause of disputes between sellers and buyers, is the seller’s responsibility to provide certain disclosures to the buyer. Some of these disclosures are more obvious and objective, such as the existence of a homeowners’ association, or whether or not the property was built before 1978, but the seller must also meet a more subjective standard which requires the seller to disclose to buyer any “facts materially affecting the value of the property which are not readily observable and which have not been disclosed to buyer”. This rule comes from the Florida Supreme Court’s decision in Johnson v. Davis, 480 So. 2d 625 (Fla. 1985), in which the Supreme Court established this rule in response to a seller’s misrepresentation of the status of a leaking roof. In the Johnson v. Davis case, a seller affirmatively repeated to the buyers that, despite their concerns, there were no issues with the roof to the premises. However, during a period of heavy rain, the buyers discovered water “gushing” into the house. The Court then allowed the buyers to rescind the contract.
This case, and the inclusion of its holding in most contracts dealing with the sale of residential real estate in the state of Florida, make it important for a seller to give some thought about what he or she must disclosure to a buyer before closing of the sale of the property. Any defects, even if fully repaired, should be disclosed as they may affect the value of the property. A sinkhole is a perfect example. Sinkholes can be repaired, but even if fully certified as repaired by an engineer, the fact that a sinkhole was once present within the property could certainly affect its value.
As a rule of thumb, a seller should disclose anything about the property that they believe they personally would like to know if they were the party purchasing the property. However, if you are unsure as to whether or not a specific item, repair, or defect should be disclosed to a buyer of real property, consult with a real estate attorney. It is important to ensure proper disclosures are being made in order to avoid potential conflict and litigation which could occur after the closing of the sale of the home, once the potential defect is discovered by the buyer. A real estate attorney may also be able to provide a list of common disclosure items and questions to be answered and delivered to buyer.
Interestingly, Section 689.25 of the Florida Statutes clarifies that a murder, suicide, death, or HIV or AIDS diagnosis of an occupant of a property is not required to be disclosed under the current rule.