ARE REAL ESTATE PROFESSIONALS REQUIRED TO INVESTIGATE UNKNOWN DEFECTS TO PROPERTY?

By James W. Mallonee

Are real estate sales personnel required to investigate defects in a residential property before listing it? The answer is yes and no.

There is certainly a responsibility to investigate if you are aware of such defects and expose those defects in non-commercial properties. But just when is that disclosure to be made and by whom.

In 2021, the first District Court of Appeals helped settle that rule in the Busuttil v. Certified Home Inspections, LLC, John McDonald and Vanguard Realty, Inc., case. The case arose from the sale of residential property. Prior to the sale of the property, Mr. McDonald stated that the roof was only a year old and had a warranty which was transferrable to a new buyer.

As is normal in most residential home sales, an inspection was ordered and the inspection company (Certified) was unable to find any issues with the roof following their inspection. The sale and closing took place; however, months after the purchase the new owner discovered roof leaks. The leaks were occurring at the rear of the residence. There was water damage to the ceiling and walls. After investigation, it was determined that the leaks were the result of an addition that was added to the rear of the residence. The interesting part of the investigation is that the addition was never permitted prior to its construction. This brought on amendments to the initial complaint regarding negligence and misrepresentation. A trial occurred and the following is the outcome of that trial.

The court determined that Florida Statutes do not impose a duty upon real estate agents nor their brokers to perform extensive research consisting of inspecting such property to determine the existence of any latent conditions affecting real property or conditions that materially affect the value of such property. However, if the defects and its existence is known or readily observable to a buyer then there is a duty to inform the buyer of such defects. The trial court disagreed with the buyer’s advocation stating that at the time of the sale and purchase, such defects were not readily observable, which resulted in the buyer filing an appeal to the First District Court of Appeals.

At the appeals hearing, Busuttil advocated that the seller and its agent owed a duty to investigate encumbrances, potential defects, permitting issues, code violations and to disclose these problems to the buyer at the point of sale. The court disagreed with the buyer stating the statute as written does not support a requirement that a Realtor has additional duties such as research and investigation where such defects are not readily observable. Instead, the Appellant court held that real estate agents have a duty to disclose all known facts that materially affect the value of residential real property including those that are not readily observable (but are known). The court went on to state that if the legislature wanted real estate professionals to investigate latent defects, it would have included it in the statute (which it did not).

Recently, this author was involved in defending an owner that sold property to a buyer involving mold to their residential property. One year following the sale of such real estate, the buyer noticed mold appearing and sued for failure to disclose the fact that the owner knew about previous bouts involving mold.

The case never went to trial, but was settled when it came to be known that the residential properties removal of rain water was ineffective causing water to seep beneath the slab and be wicked up into the living space of the residence. Nobody knew this was happening, it was an impossible observable discovery without watching the flow of the roof’s runoff and seeing where the water flowed.

The message to be taken from this case is that an investigative examination of residential property by a Realtor is not a requirement. Disclosure is a requirement provided that knowledge of a defect is observable or is known by the Realtor. It is important to note that such defect must, in most cases, affect the value of the property. However, in this author’s experience, you are better off disclosing all defects and let the buyer determine whether the defect affects the value of the property to the point of terminating its purchase.

If you have a real estate purchase or sale and you are not sure if disclosure is needed, contact the attorney of your choice and have that discussion. It could save a great deal of expense in money, time and energy.

This article is intended for informational use only and is not for purposes of providing legal advice or association of a lawyer – client relationship