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LEGAL CORNER with ANDREW PINEIRO, Esq.
If a property is in a flood prone neighborhood, is the seller under a duty to disclose all known facts and circumstances regarding the flood history of the property?
The answer is yes.
Recently, the Second District Court of Appeal of Florida, in Smith v. Lynch, zeroed in on the issue of whether the duty to disclose goes as far back as what the prior seller of the property had disclosed regarding a property’s flood history. In April 2021, Smith purchased a single-family home (the Property) in St. Petersburg, Florida, from Lynch. The parties executed a standard “As Is” sales contract. Additionally, Lynch filled out a Seller’s Disclosure form stating the Property had sustained “slight” water damage to carpets and water on the garage floor in 2020, but this damage had been cleared and repaired. Smith hired a home inspector during the inspection period which found the home to be in satisfactory condition. Due to the Property’s location within a flood zone, Smith’s lender required that he obtain flood insurance. Smith obtained a flood insurance policy that he was told would cost $2,500 per year and the parties closed on the transaction.
Shortly after closing, the flood insurer informed Smith that the flood insurance policy premium would increase from $2,500 to $7,791 per year because the Property had been deemed a “severe repetitive loss.” Smith then requested additional information about the flood loss history on the property from FEMA and discovered that the Property had sustained five floods since 1982. Lynch owned the property only during the one 2020 flood. However, Smith learned that Lynch’s flood insurer had paid $31,000 for damage to the Property from that 2020 flood.
Smith hired an attorney and sent Lynch a demand letter for damages, representing the projected additional cost of flood insurance over thirty years. Lynch denied any wrongdoing, so Smith filed suit alleging breach of contract for failure to disclose the Property’s flood history pursuant to Johnson v. Davis, 480 So. 2d 625 (Fla. 1985).
The appellate Court in Smith noted that in Johnson, the Supreme Court of Florida articulated 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 Smith Court reasoned that a finding of a seller’s liability under Johnson required that the seller had actual knowledge of the facts materially affecting the property.
The Smith Court determined that it would be unreasonable to expect Smith to assume the specific home he was purchasing had an extensive flood history, even if he was aware the neighborhood itself was prone to flooding. The Smith Court found that based on the record evidence, a jury could conclude that Lynch knew that the 2020 flood was more than “slight water damage to carpets and water on the garage floor” because they lived in the Property at the time and initiated the flood insurance claim which resulted in a $31,000 payment.
Additionally, evidence in the record showed Lynch had been made aware of prior instances of flooding by the seller when Lynch purchased the Property. The Smith Court found that the prior flood events were not readily observable to Smith and that Lynch minimized the extent of the damage. Accordingly, the Court ruled that there was competent, substantial evidence that Lynch had actual knowledge of the Property’s significant flood history that was not readily observable or known to Smith.
The moral of the story is that as a seller, if you are aware of a problem, defect, or issue that materially affects the value of a property and it is not readily observable, disclose disclose disclose!
If you have a question concerning your duty to disclose as a seller of residential real estate in Florida, consult a real estate attorney for advice.
Andrew Pineiro, Esq., Pineiro Byrd PLLC,
4600 Military Trail, Suite 212, Jupiter, Florida 33458, apineiro@pblawfla.com
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