In the recent case of Solorzano v. First Union Mortgage Corp. n/k/a Wachovia Mortgage Corp., filed Feb. 23, 2005 in the 4th District Court of Appeals (4th DCA) on the east coast of Florida, Gavi Solorzano (Solorzano) purchased a residence from Wachovia Mortgage Corp. (Wachovia) in April of 2001.
In the suit, filed on Jan. 21, 2004, it was alleged by Solorzano that prior to the sale Wachovia knew that the City of Lake Worth had determined that there were material housing code violations on the property that materially affected the value of the property, that the code violations were not readily observable by Solorzano at the time she purchased, that as a result of the nondisclosure of the code violations, Solorzano purchased the property, that the material decrease in the value of the home damaged Solorzano and that City of Lake Worth had already levied code violation fines on the property in excess of $57,000.
Wachovia, in response filed a motion to dismiss alleging that Solorzano failed to state a cause of action, because Wachovia sold the residential property "as is" and that Solorzano had ample time and opportunity to conduct due diligence, examine title, and research existing code violations before the closing and that the code violations were "open, notorious, and readily observable.
On March 16, 2004, the trial court granted Wachovia's motion to dismiss with prejudice. The 4th DCA reversed the trial court's dismissal. In doing so, the 4th DCA referred to an often quoted Supreme Court of Florida Case, Johnson v. Davis, which said: "we hold 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. This duty is equally applicable to all forms of real property, new and used."
The 4th DCA went on to say that "Wachovia's reliance on the 'as is' provision of the sales contract in support of its motion to dismiss is misplaced. The inclusion of an 'as is' clause in a contract for the sale of residential real property does not waive the duty imposed upon a seller under Johnson."
The court went on to say that "whether Solorzano readily observed the alleged housing code violations or whether she had adequate time to research the alleged violations is not properly resolvable on Wachovia's motion to dismiss. . . . the trial court incorrectly went beyond the four corners of the amended complaint, did not accept all allegations as true, and mistakenly speculated on whether Solorzano will ultimately be able to prove her allegations"
What this case goes to show is that it's safer for a residential seller to disclose all facts materially affecting the value of a residential property whether the seller believes they are "readily observable or known to the buyer," or not. Otherwise, it can be a very expensive venture to determine whether they were or were not readily observable or known, and even more expensive if it is ruled by a court that they were not.
Rob Samouce, a principal attorney in the Naples law firm of Samouce, Murrell, & Gal, P.A. concentrates his practice in the areas of community associations including condominium, cooperative and homeowners' associations, real estate transactions and closings, general business law, estate planning, construction defect litigation and general civil litigation. This column is not based on specific legal advice to anyone and is based on principles subject to change from time to time. Those persons interested in specific legal advice on topics discussed in this column should consult competent legal counsel.