We handle many real estate transactions in our office and we have found that some clients believe that if they sell their property pursuant to the “As-Is Residential Contract adopted by the Florida Realtors and the Florida Bar, that they do not need to inform buyers of defects in the property. However, this is incorrect.
Under the Florida Supreme Court’s decision in Johnson v. Davis, 480 So.2d 625 (Fla. 1986), a seller of residential real property must disclose any hidden or latent defects if he or she has knowledge of those conditions and such conditions materially affect the value of the property and such conditions are not readily observable or known to the buyer.
The Florida Supreme Court in Johnson v. Davis held “that where the seller of a home knows of facts materially affecting the value of the 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.” Id. at 629.
In addition, the Florida Supreme Court further clarified this rule in the case of Schottenstein Homes, Inc. v. Azam, 813 So. 2d 91, 95 (Fla. 2002), by confirming that a buyer may rely on a fraudulent representation without a duty to make an inspection unless the falsity is “obvious.”
Therefore, if (1) the seller has actual knowledge of a property defect, (2) the defect materially affects the value of the property, (3) the defect is not readily observable and is unknown to the buyer, and (4) the seller fails to disclose the defect to the buyer, then the buyer may have a cause of action against the seller for a material misrepresentation regarding the property.