Must information in the public record be disclosed to buyers of residential real property and may it be mispresented?

AuthorWorsham, E. Lee
PositionFlorida

In many cases of alleged nondisclosures or misrepresentations, where information in the public record is relevant or material, an issue frequently arises regarding what information contained in public records a buyer of residential property should be expected to know, or what information will a buyer be deemed to know by constructive notice. This article will explore Florida law involving concealment or nondisclosure and misrepresentation of matters that may be found in the public records.

Accompanying Florida's staggering growth is litigation that accuses developers, sellers, and brokers of unlawfully failing to disclose, concealing, and misrepresenting matters significantly affecting residential real property. Subjects of alleged nondisclosure or misrepresentations are diverse. Examples include structural problems, termite infestation, flooding problems, soil subsidence, or other adverse subsurface conditions, wetlands or protected species, zoning, land use classification, permit issuance, existing or proposed uses of nearby properties, future roadway plans, code enforcement violations, whether the property is in compliance with law, the existence of hazardous substances on or near the property, water frontage issues, and even if the owner of the property can build a residence on it.

The legal theories applicable to these cases include fraudulent concealment or fraudulent nondisclosure of a material fact. (1)

Information contained in the public records of Florida is relevant to many if not most of the examples listed above. Florida maintains an expansive list of what constitutes a public record. (2) Public records are defined as:

... all documents, papers, letters, maps, books, tapes, photographs, films, sound recordings, data processing software, or other material regardless of the physical form, characteristics or means of transmission, made or received pursuant to law or ordinance or in connection with the transaction of official business by any agency. "Agency" means any state, county, district, authority, or municipal officer, department, division, board, bureau, commission, or other separate unit of government ..., and any other public or private agency, person, partnership, corporation, or business entity acting on behalf of any public agency. (3)

Although public records include much more than land use regulations, a district court in Metropolitan Dade County v. Fontainbleau Gas & Wash, Inc., 570 So. 2d 1006 (Fla. 3d DCA 1990), held that "owners of real property are deemed to have purchased it with knowledge of the applicable land use regulations." However, when representations are made to a buyer, the question becomes whether the law "should ... expect every potential homeowner in every case to root around the bowels of the courthouse for those surveys, plats, and records which would verify or contradict a seller's representations about the property." (4)

Some public records are relatively easy to discern, like matters in a property's chain of title. Others, however, sink to the level of obscurity, like government soil surveys revealing potential impediments to construction, inclusion of a property within the known range of a protected species, whether wetlands have been identified or documented on a property, whether a property contains a plume that originated from a nearby contaminated former gas station, or whether a home's floor pad elevation complies with a government permit or other regulatory requirements.

Fraudulent Concealment or Nondisclosure of a Material Fact

Johnson v. Davis, 480 So. 2d 625 (Fla. 1985), created an exception to common law caveat emptor or "buyer beware" in connection with residential real property transactions, which has been referred to as "fraudulent concealment" or "fraudulent nondisclosure." (5) Johnson has also been referred to as the case that abolished caveat emptor for residential properties or noncommercial real estate transactions. The Florida Supreme Court, in Johnson, stated: "(T)he law appears to be working toward the ultimate conclusion that full disclosure of all material facts must be made whenever elementary fair conduct demands it." (6)

In Johnson, buyers placed a $5,000 deposit on and entered into a contract for purchase of a three-year-old residence. The contract contained a provision that the roof be watertight, and included a requirement that seller repair the roof to a watertight condition, if necessary. Before paying the remaining $26,000 deposit, buyers asked about stains on the walls which sellers said were from wallpaper glue and from relocating ceiling beams. Buyers then paid the balance, for a total deposit of $31,000. Several days later, one of the buyers entered the house following a heavy rain and found water "gushing" into the house. Seller's contractor said the roof could be made "watertight" for $1,000, but buyers' contractor said the roof had failed, necessitating replacement for $15,000, and repairing water damage required another $10,000. Buyers elected not to close and sued sellers for breach of contract, rescission of the contract, fraud and misrepresentation, and sought return of their deposit. Sellers counterclaimed seeking the deposit as liquidated damages but did not demand specific performance.

The trial court awarded $26,000 to the buyers, apparently convinced that they were induced to pay that sum by seller's fraudulent misrepresentation that there were no problems with the roof, but did not grant rescission based upon breach of contract. The trial court did not return the initial $5,000 deposit to the buyers. However, the Third District affirmed the award of $26,000 to the buyers and reversed as to the $5,000, holding that the initial deposit should also have been awarded to the buyers. The Third District held that sellers were aware of and had a duty to disclose the roof problems to the buyers before entering into the contract and accepting the initial deposit.

The Florida Supreme Court affirmed the Third District, holding "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...." The Supreme Court concurred with the district court that sellers knew of and failed to disclose that there had been roof problems prior to entering into the contract and receiving the initial $5,000 deposit. The court found that not only had there been a fraudulent misrepresentation concerning the condition of the roof, justifying return of the $26,000, but also there had been fraudulent concealment justifying return of the initial deposit. Costs and fees were awarded to the buyers.

In reaching the Johnson decision, the Florida Supreme Court quoted with approval language in a California case regarding information found in the public records. In Lingsch v. Savage, 29 Cal. Rptr. 201 (Cal. Ct. App. 1963), allegations were made, that among other things, the building was "illegal" and that it had been targeted for condemnation by the city:

It is now settled in California that where the seller knows of facts materially affecting the value or desirability of the property which are known or accessible only to him and also knows that such facts are not known to or within the reach of the diligent attention and observation of the buyer, the seller is under a duty to disclose them to the buyer. (7) (Emphasis added.)

Obviously, if the facts are "known to or within the reach of the diligent attention and observation of the buyer," they will not be considered "known or accessible only to" the seller. The operative question then becomes what in the public records is within the "reach of the diligent attention and observation of a buyer," and what records are beyond that reach?

Does caveat emptor still apply with regard to matters in the public records? The answer appears to be a qualified yes, depending upon the degree of difficulty in identifying and locating the relevant public records. Common sense dictates that potential homeowners will rarely have the knowledge, inclination, or resources to conduct extensive public record examinations. The relevant cases suggest that buyers of...

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