Real Estate Tips and Topics

Is a Seller’s Disclosure Required?

By Joel Maxson

April 2, 2018 – Based on what we hear on Florida Realtors Legal Hotline, most residential sellers are content to complete the Florida Realtors Seller's Property Disclosure – Residential form (SPDR) around the same time they enter into a listing agreement. However, every now and then, a seller will balk at the idea of completing this form, prompting a member to ask what Florida law requires regarding disclosures.

Although sellers aren't required to complete this specific SPDR form, a residential seller does have to comply with the rule established in Johnson v. Davis. In that case, the Florida Supreme Court 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." These material facts are sometimes referred to as latent defects.

In addition, in Rayner vs. Wise Realty Co. of Tallahassee, the First District Court of Appeal provided that this same disclosure requirement applies to residential properties that are being sold as is.

Sellers can make this disclosure in writing or verbally, although Florida Realtors attorneys recommend that it be made in writing. 

Realtors should note that the SPDR contains safeguards to ensure the seller completes the form – not the associate or broker. As a reminder to all parties, the first line of the SPDR provides "Notice to Licensee and Seller: Only the Seller should fill out this form." 

As a separate but related issue, some brokerage companies may require that certain documents (like a seller's property disclosure) be maintained in a file, so associates should always ensure they understand and comply with any specific requirements their company may have.

Must you disclose defects you only sorta know about?

In the 1985 case Johnson v. Davis, the Florida Supreme Court ruled that a home seller who knows of facts that materially affect the property's value that isn't readily observable and known to a buyer has a duty to disclose them to the buyer. This is the law in Florida today.

A nondisclosure claim under Johnson v. Davis has four elements:

  • The home seller must know of a defect in the property
  • The defect must materially affect the property's value
  • The defect must not be readily observable by the buyer and must be unknown to the buyer
  • The buyer must establish that the seller failed to disclose the defect to the buyer

In 2011, the 2nd District Court of Appeal heard a separate case, Jensen v. Bailey, and rendered an opinion that focused on the first element of liability under Johnson v. Davis – that the home seller knows of a defect in the property.

Specifically, the court considered whether anything less than actual knowledge is sufficient to satisfy the first element.

The facts of the Jensen vs. Bailey case: The seller had done substantial remodeling. After closing, the buyer discovered that permits were required for the work but never obtained. The work hadn't been properly done and it didn't conform to code. As a result, the buyer had to redo the work so it conformed to the new, more stringent code requirements.

The trial court found no evidence that the seller knew that the contractor had failed to obtain permits or that the work hadn't been done properly. However, it found that the seller was still liable to the buyer based on a "should-have-known" standard.

However, the case was appealed, and an appellate court disagreed, reversing the trial court's final judgment.

In order to hold a seller liable under Johnson v. Davis, the buyer must prove that the seller actually knew of an undisclosed material defect, the court ruled, and the should-have-known standard was denied.

© 2018 Florida Realtors®

 

Contact Eric Slifkin to buy or sell a home on the Treasure Coast.

Eric Slifkin, a Broker Associate, is the founder of the Slifkin Team at Keller Williams Realty. Eric and his team of experienced agents serve South Florida and the Treasure Coast, including greater Stuart, Port Saint Lucie, and the Palm Beaches.