Daily Development for Monday, August 9, 2004
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin Kansas City, Missouri dirt@umkc.edu
VENDOR/PURCHASER; MISREPRESENTATION; “AS IS” CLAUSE: Seller’s broker not
relieved from liability for nondisclosure of known latent defects by clause in
sale agreement that court construes to function as an “as is” clause.
Syvrud v. Today Real Estatae, Inc., 858 So. 2d 1125 (Fla. App. 2003)
Buyers brought suit for rescission and damages against sellers and sellers’
broker in connection with the acquisition of a condominium unit. Buyers alleged
that the condominium unit itself and the condominium project in general were
heavily infested with termites, that seller had knowledge of this problem, and
in fact had received several communications from the homeowners’ association
warning of dire assessments to resolve the issue. They alleged that brokers also
were familiar with the issues.
The contract to acquire the condominium from Seller was a form agreement
approved by the Florida Bar and the Florida Association of Realtors. The form
included a paragraph (Paragraph “W”) stating that the seller warranted that
there were “no facts known to Seller materially affect the value of the Property
which are not readily observable by Buyer which have not been disclosed to
Buyer.”
The parties amended the agreement by a typed amendment that included the
following language:
“Buyer(s) hereby acknowledge that the property being sold is not new and that
the seller(s) and broker(s) make no verbal representations, warranties or
guarantees as to the condition of the property and it’s [sic] appurtenances
and/or fitness for specific purpose. . .
Buyer(s) and Seller(s) agree to rely upon themselves and those licensed to give
professional advise [sic] regarding compliance with or and [sic] aspect of the
property including, but not limited to . . . roofing, mechanical, electrical,
plumbing, appliances and other appurtenance conveyed with the sale. The Real
Estate Agents[‘] opinions, if any, have been only in marketing and sales
negotiations.”
The addendum also indicated that the contract was contingent upon buyer’s
receipt and approval of seller’s disclosure statement and buyer’s satisfaction
of an inspection report. There was a disclosure statement, submitted by seller,
that did not mention the termite conditions.
The trial court, on the basis of the language quoted above, concluded that the
broker had no responsibility for disclosure of the alleged defective conditions
and dismissed the broker out of the lawsuit.
On appeal: held: reversed.
The appeals court concluded that the exculpatory language in the addendum
amounted to an “as is” clause and treated it as such. But the court stated that
the leading case of Johnson v. Davis, 480 So. 2d 685 (Fla. 1985), which follows
the common law rule requiring the disclosure of known latent defects to the
buyers, and which has been held applicable to brokers as well as to sellers, is
not avoided by an “as is” clause according to several Florida cases.
The broker cited more recent authority to the court (which the court does not
identify or discuss) indicating that common law disclosure duties may be waived
in a contract. The court stated that it did not need to reach that issue because
the contract itself imposed a disclosure duty on the brokers and the waiver
language did not refer to the contract provision imposing that duty, so the duty
was not waived.
Comment 1: This is a pretty clumsy opinion overall. Although the editor agrees
with the result, in the editor’s view the court should have stepped up to the
issue and held that, whatever the recent cases mean, they should not be read as
holdings that an “as is” clause can absolve brokers in residential transactions
from failure to advise buyers of known material latent defects of which the
brokers have actual knowledge. Whatever the policy reasons for permitting the
parties to exculpate sellers from this responsibility, there is no reason to
permit brokers to avoid what ought otherwise to be their professional
responsibility.
Instead, the court makes some weird interpretation of the provision dealing with
the seller’s disclosure statement (paragraph W) to conclude that the contract
imposed on the brokers a duty of disclosure. It is quite possible, of course,
that there was a contractual duty of the sellers that wasn’t waived, but where
did the court get a brokers’ duty out of that language? Note that the entire
text of that paragraph, as cited by the court, dealt with the duty of sellers.
Note also that the contract expressly mentioned brokers separately in many areas
where the intent was to affect both the parties and the brokers.
Comment 2: The editor believes that it is and should be outside of the ethical
responsibility of brokers to advise parties on the sale of a house and in the
same document, as a condition of securing a deal with someone else, require that
brokers be released from liability for nondisclosure of known latent facts..
If the brokers want to be released from liability, let them obtain express
separate waivers in connection with their provision of the services in question.
Buyers and sellers should be free to reach whatever bargain they desire between
themselves without the encumbrance of waivers of claims against brokers or their
related companies.
It is not surprising to the editor that the court here is hostile to such
waivers. It would be better to have them struck down entirely. The editor is
fully aware that brokers have run to the legislature in many states and have
obtained waivers of liability and changes in ethical duties in many cases.
That’s their right - if that’s where the legislature feels the public policy
balance lies - let them unleash the brokers to mislead consumers. But it is
quite a different thing, absent statute, for brokers to slip exculpatory
language into form documents relating to their clients’ transactions with third
parties. The brokers shouldn’t do it.
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