Most of us in the real estate business know the standard in Florida: “where the seller of a home knows of facts materially affecting the value of a 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.” Johnson v. Davis, 480 So.2d 625 (Fla. 1985). This language is even reiterated in our standard contracts [see para. 10(j) of the FAR/BAR contracts].
However, what many do not realize is that this duty extends to the real estate agent AND the agent’s broker. Several seminal cases exist to establish the duty of disclosure of not only the real estate agents, but also the brokers themselves. Below is a brief summary of the holdings of some of these cases.
The 3rd District Court of Appeals (Fla.) in Revitz v. Terrell, 572 So.2d 996 (1990) stated, “[a]ssuming that the seller’s agent knew, or reasonably should have known [of the material fact], there was a duty to disclose that fact to the buyer.” This case, and its progeny, effectively extend the standard of Johnson v. Davis to real estate agents.
The 2nd D.C.A. (Fla.) went further in Young v. Johnson, 538 So.2d 1387, stating, “[a]lthough the record does not reflect that [the real estate agent] had actual knowledge of [the material fact], the ‘knowledge’ element…can also be established by proof that [the agent] made a material false representation without knowledge of its truth or falsity, or under circumstances which he should have known of its falsity.” A troubling standard, which remains today. The agent could be held liable for making statements that he doesn’t know are false (i.e. lacking actual knowledge), but that turn out to be false, or where he should have known of their falsity when he made them.
Even more recently, the 4th D.C.A. (Fla.) extended the Johnson v. Davis standard to brokers under an agency theory in the case of Goodman v. Rose Realty West, Inc., 2016 WL 2744975 (2016). The liability of the agent was imputed to the broker. The case stated that the broker, as the principal, is liable for the tortious acts of its agent, despite the acts being fraudulent, since the acts are within the scope of an agency relationship. Any information that was withheld or failed to be disclosed was done during the scope of the agent attempting to sell the property, and the broker has an interest in the transaction because the broker would earn a commission from the sale.
As you can see, the liability for failure to disclose can be far-reaching. If you are an agent or broker and have concerns over whether or not you have a duty to disclose in any given circumstance, you should always contact a licensed Florida real estate attorney for advice.