Authored By: Ryan A. Featherstone, Esq.
rfeatherstone@dunlapmoran.com; 941.366.0115
In a recent legal development, the Florida Second District Court of Appeal reversed a trial court’s decision that had favored the Sellers in a property disclosure dispute. The case, SMITH VI v. LYNCH, 2025 WL 821 So. 3d 1197 (Fla. 2d DCA Feb. 14, 2025), was decided on February 14, 2025, and underscores the critical importance of full transparency in real estate transactions, particularly concerning a property’s history of flood damage.
Case Background
In April 2021, Jesse Carl Smith, VI (the “Buyer”) purchased a single-family home in St. Petersburg, Florida, from Kinney and Deborah Lynch (the “Sellers”). The sale was conducted under an “As Is” contract, accompanied by a Seller’s Disclosure form. This form noted “slight” water damage in 2020, describing it as affecting carpets and the garage floor, with all areas “cleared and repaired.” Following a satisfactory home inspection and awareness of the property’s location in a flood zone—which necessitated obtaining flood insurance, the Buyers proceeded with the purchase.
However, shortly after closing, the Buyer’s flood insurance premium escalated from approximately $2,500 to $7,791 annually. He discovered that the property had been designated as a “severe repetitive loss” due to multiple flood insurance claims, including a $31,000 payout for the 2020 incident. The Buyer alleged that the Sellers had knowingly withheld this significant information, leading to increased insurance costs and potential impacts on the property’s value.
Legal Proceedings
The Buyer filed a lawsuit against the Sellers, alleging failure to disclose material facts about the property’s flood history. The trial court granted summary judgment in favor of the Sellers; a decision the Buyer appealed. The appellate court identified that the trial court had misapplied legal precedents, notably by referencing a case dealing with general neighborhood flooding rather than specific property-related flooding. The court emphasized that the Sellers’ failure to disclose the property’s severe repetitive loss status was material, directly affecting its value through substantially increased insurance premiums.
Court’s Findings
The appellate court concluded that the trial court erred in granting summary judgment to the Sellers. It highlighted that the Sellers had a legal obligation to disclose known facts materially affecting the property’s value, especially when such facts were not readily observable. The court noted that the Sellers’ nondisclosure of the property’s severe repetitive loss designation had a direct and significant impact on its value, as evidenced by the substantial increase in flood insurance costs.
Implications for Real Estate Transactions
This case serves as a cautionary tale for both sellers and buyers in Florida’s real estate market:
- Sellers’ Duty to Disclose: Sellers are legally required to fully disclose any known material facts about a property’s condition, including its history of flood damage and related insurance claims. Failure to do so can lead to legal action and potential financial liability.
- Buyers’ Vigilance: Buyers should conduct thorough due diligence, including property inspections and reviews of flood zone designations and insurance claims history, to identify potential issues that could affect the property’s value and their future expenses. A buyer needs to request the “FEMA Flood Loss History Report” for the property from the sellers, as only the current owner is entitled to obtain that report.
The SMITH VI v. LYNCH decision reinforces the necessity of honesty and transparency in property transactions, including flood loss history, ensuring that all parties are fully informed to make sound decisions. Regarding prior flood loss, section 689.302, Florida Statutes, now requires a flood disclosure be provided by the seller to prospective buyers at or before the time the sales contract is executed, disclosing the flood claim history of the property.
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