A Florida appellate court has considered whether a purchaser's lawsuit adequately stated claims against a listing broker for failing to disclose latent defects on the property.
Paul and Mary Cummings ("Sellers") entered into a contract to sell their townhouse condominium to Erik and Carol Syvrud ("Buyers"). Both parties were represented by real estate licensees in the transaction.
Following the close of the transaction, the Buyers discovered water damage and structural defects in the townhouse. Additionally, the Buyers learned that a number of buildings in the condominium association had substantial structural problems and over the past year, the association had notified unit owners in various letters that unit owners would face an assessment in excess of $20,000 per unit. The Sellers had not disclosed any of this information to the Buyers.
The Buyers filed a lawsuit against the Sellers, the Buyers' real estate licensees, and the listing broker, Today Real Estate, Inc. d/b/a ReMax Today ("Listing Broker"). The lawsuit sought to void the purchase contract as well making various claims for damages resulting from the nondisclosure of the defects. The Listing Broker moved to dismiss the allegations made against it, based on language contained in the purchase contract. The trial court granted the motion, and the Buyers appealed.
The District Court of Appeal of Florida, Second District, reversed the trial court and reinstated the Buyers' lawsuit against the Listing Broker. Florida law requires a seller of property to disclose all known facts about the property which "materially affect" the value of the property and are not observable or known to the buyer. A listing broker can be liable for negligence and fraudulent misrepresentation when such defects are not properly disclosed.
The Listing Broker argued that the Buyers waived their claims for nondisclosure in the purchase contract. A section of the purchase contract stated that the Buyers acknowledged that the "property being sold is not new and the seller(s) and broker(s) make no verbal representations, warranties, or guarantees as to the condition of the property and it's [sic] appurtenances and/or fitness for specific purpose." The court determined that the clause in question was the equivalent of an "as-is" clause. Under Florida law, an "as-is" clause does not remove the obligation of the seller to disclose known hidden defects to the buyers or those defects which a listing broker has knowledge. Therefore, the court ruled that the Buyers had stated a nondisclosure case against the Listing Broker and so the court reversed the trial court, reinstating the case. Parenthetically, the court added that it did not have to determine at this point whether the Buyers could have waived the duty of disclosure, as the only issue before the court at this time was whether the Buyers had properly alleged nondisclosure in their complaint.
Next, the court considered whether the Buyers had properly alleged negligence against the Listing Broker. The "as-is" clause could limit the duty the Listing Broker owed to the Buyers. However, the court found that the effect of the "as-is" clause on the negligence allegations is a question of fact which a jury needs to resolve. Thus, the court reversed these allegations as well and sent the case back to the trial court.
Syvrud v. Today Real Estate, Inc., 858 So. 2d 1125 (Fla. Dist. Ct. App. 2003).