Must You Disclose Defects You Only Sorta Know About?

In order to hold a seller liable under Johnson v. Davis, the buyer must prove that the seller actually knew of an undisclosed material defect.

PALM COAST, FL – April 2, 2018 – In the 1985 case Johnson v. Davis, the Florida Supreme Court ruled that a home seller who knows of facts that materially affect the property's value that aren't readily observable and known to a buyer has a duty to disclose them to the buyer. This is the law in Florida today.

A nondisclosure claim under Johnson v. Davis has four elements:

• The home seller must know of a defect in the property
• The defect must materially affect the property's value
• The defect must not be readily observable by the buyer and must be unknown to the buyer
• The buyer must establish that the seller failed to disclose the defect to the buyer

In 2011, the 2nd District Court of Appeal heard a separate case, Jensen v. Bailey, and rendered an opinion that focused on the first element of liability under Johnson v. Davis – that the home seller knows of a defect in the property.

Specifically, the court considered whether anything less than actual knowledge is sufficient to satisfy the first element.

The facts of the Jensen vs. Bailey case: The seller had done substantial remodeling. After closing, the buyer discovered that permits were required for the work but never obtained. The work hadn't been properly done and it didn't conform to code. As a result, the buyer had to redo the work so it conformed to the new, more stringent code requirements.

The trial court found no evidence that the seller knew that the contractor had failed to obtain permits or that the work hadn't been done properly. However, it found that the seller was still liable to the buyer based on a "should-have-known" standard.

However, the case was appealed, and an appellate court disagreed, reversing the trial court's final judgment.

In order to hold a seller liable under Johnson v. Davis, the buyer must prove that the seller actually knew of an undisclosed material defect, the court ruled, and the should-have-known standard was denied.

© 2018 Florida Realtors®. All rights reserved. Reprinted with permission.