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Real Estate Seller’s Duty to Disclose Latent (“Hidden”) Defects

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The closing on a home should be an exciting experience for the buyer and seller. However, real estate transactions involve many legal issues. Parties are concerned about financing, occupancy, title insurance, surveys, closing costs, inspections, liens, tax laws and numerous other legal considerations. At the forefront, buyers are interested in their rights and sellers are concerned about their obligations regarding the physical condition of the property.

Are you in the process of buying or selling your residence or other real estate?  The condition of the property is a topic where disputes frequently arise.  Most real estate sales contract forms provide the buyer with the right to have appropriately licensed professionals inspect the premises before closing.  There is typically a deadline by which to complete the inspections and notify the seller of any issues or objections.  If the inspection period lapses without any objection by the buyer, then these contract rights are generally waived or satisfied.  Irrespective of the contract terms, separate case law rights and duties also apply.

Buyers have additional rights regarding the condition of the property pursuant to the Florida Supreme Court’s decision in Johnson v. Davis, 480 So.2d 625 (Fla. 1985).   In that case, the court held that when 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 duty to disclose them to the buyer. This duty is equally applicable to all forms of real property, new and used. The Johnson decision does not require the seller to warrant the condition of the property. Rather, the court mandates that the seller advise the buyer about latent (“hidden”) defects affecting the material value of the property prior to entering into the contract.

Please note that the seller is not required to make any warranties regarding the physical condition of the property. Rather, the parties may agree the property will be sold in its “as is” condition. However, the courts subsequently held the Johnson decision also applies to “as is” contracts. Therefore, even with an “as is” contract, the seller must disclose hidden defects to the buyer before signing the contract.

To comply with the Johnson case, it is common practice today for real estate brokers and agents to have the seller(s) complete and sign a disclosure regarding prior repairs and known issues. I caution sellers to take their time and be thorough with their answer to each question.  Buyers should request a copy of the disclosure and review it before submitting an offer.

A competent real estate attorney can protect and advise you regarding these and other legal considerations.  I hope your next real estate transaction will be a smooth and pleasant experience.

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