Kjellander v. Abbott is an important Florida appellate decision that reinforces the disclosure obligations of real estate agents and brokers to buyers of residential properties and it shows that contracts frequently used in residential real estate transactions do not insulate Florida real estate agents and brokers from the duty imposed under Florida law to disclose conditions materially affecting the value of residential properties that are known to agents and brokers and unknown, not readily observable and not disclosed to buyers.
The case was as follows: after closing on the residential home sale, the buyers allegedly discovered that the home had numerous undisclosed material defects, including water damage, mold, and problems with the HVAC system. The buyers sued the sellers, the sellers' real estate agents, and the buyers' home inspector, alleging that they misrepresented, concealed, and/or failed to disclose the true condition of the home. The trial court granted summary judgment in favor of the real estate agents on the Johnson v. Davis claim (Johnson v. Davis, 480 So.2d 625 (Fla.1985) 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 buyer must establish that the seller failed to disclose the defect to the buyer. ") and dismissed the buyers' other claims against the agents for fraudulent misrepresentation, fraudulent concealment, and breach of the duties of honesty, candor and fair dealing alleged in other counts of the complaint.
The real estate agents' motion for summary judgment was based on language in the purchase and sale agreement attached as an exhibit to the complaint which the agents argued contradicted the buyers' claims in their complaint. The buyers filed a timely appeal and the appellate court reversed. In reversing summary judgment, the appellate court determined that while the contract provided that the buyers agreed in the contract to rely solely on representations of the sellers and third-parties other than the real estate agents for verification of the home's condition, the paragraph of the contract containing that agreement also states: "This Paragraph will not relieve [the agents] of statutory obligations." Thus, claims based on allegations that the agents violated their statutory obligations were not "contradicted" by the terms of the contract.
Under Florida law, the real estate agents' statutory obligations include a duty of honesty and fair dealing, a duty to disclose all known facts that materially affect the value of the property and are not readily observable, and a duty not to make misleading, deceptive, or fraudulent representations in any transaction. See §§ 455.227(1)(a), 475.25(1)(b), 475.278(4)(a)1.-2., 475.42(1)(e), (1)(n), Fla. Stat. (2012); see also Zichlin v. Dill, 25 So. 2d 4 (Fla. 1946) (reversing dismissal of suit against real estate broker for defrauding buyer and rejecting argument that broker owed no duty to deal fairly with the buyer); Fla. Att'y Gen. Op. 96-20 (1996) (explaining that "Chapters 455 and 475, Florida Statutes, clearly make misrepresentation, concealment, and fraud by real estate brokers and salespersons contrary to the public policy of this state" and opining that any language in a real estate sales contract that purports to relieve the broker or salesperson of liability for fraud, misrepresentation, or other wrongdoing is void as contrary to public policy).
Because the buyers alleged in their complaint that the real estate agents violated these statutory obligations, all counts of the complaint directed to the real estate agents were sufficient to withstand the real estate agents' motion to dismiss.
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