Fraudulent Nondisclosure in Residential Real Estate Transactions
This article provides a brief overview of fraudulent nondisclosure in residential real estate transactions as recognized by Florida law applicable to civil litigation. In Johnson v. Davis, 480 So. 2d 625, 627 (Fla. 1985), the Florida Supreme Court recognized a cause of action for fraudulent nondisclosure in residential real estate transactions.
[W]here 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. This duty is equally applicable to all forms of real property, new and used.
Id. at 629. “Fraudulent [n]ondisclosure and [f]raudulent [c]oncealment are interchangeable names for the same cause of action authorized under Johnson ….” Solorzano v. First Union Mortg. Corp., 896 So. 2d 847, 848 n.1 (Fla. 4th DCA 2005).
“A nondisclosure claim under Johnson has four elements: (1) the seller of a home must have knowledge of a defect in the property, (2) the defect must materially affect the value of the property, (3) the defect must be not readily observable and must be unknown to the buyer, and (4) … the seller failed to disclose the defect to the buyer.” Sage v. Pahlavi, 358 So. 3d 434, 436 (Fla. 4th DCA 2023) (quotation omitted).
The duty, under Johnson, to disclose known facts materially affecting the value of the property is not affected by an “as is” provision in the sales contract. Bowman v. Barker, 172 So. 3d 1013, 1016 (Fla. 1st DCA 2015). See also, Solorzano, 896 So. 2d at 849–50 (same and collecting cases). “[I]n order for a seller to have a duty to disclose, the material facts must not only be unknown to the buyer, but also not ‘readily observable.’” Nelson v. Wiggs, 699 So. 2d 258, 260 (Fla. 3d DCA 1997).
“[T]he materiality of a fact is to be determined objectively by focusing on the relationship between the undisclosed fact and the value of the property.” Billian v. Mobil Corp., 710 So. 2d 984, 987 (Fla. 4th DCA 1998). “To be actionable, an undisclosed fact must materially affect the value of the property.” Id. Stated another way, “Johnson provides that any fact which substantially affects the value of the property is material.” Revitz v. Terrell, 572 So. 2d 996, 998 (Fla. 3d DCA 1990) (emphasis added).
“[T]he only consideration pertinent to the seller’s state of mind under Johnson is knowledge of a defect materially affecting the value of the property at the time the seller enters into the contract with the buyer.” Jensen v. Bailey, 76 So. 3d 980, 983 (Fla. 2d DCA 2011). “[T]he seller’s state of mind motivating the failure to disclose is immaterial; the forgetful or unsophisticated seller is just as liable as the knowing dissembler.” Id. (quotation omitted).
“Thus the critical issue under the first element of liability under Johnson is the seller’s knowledge, not his or her intent.” Jensen, 76 So. 3d at 983. Johnson requires the seller to have actual knowledge to succeed on a claim for fraudulent nondisclosure. Id. Significantly, however, a seller’s actual knowledge “can be proven by circumstantial evidence.” Id. (quotation omitted).