Your Everyday, Garden Variety, Riddle for Lawyers

Robert lives on a parcel that has a small bait and tackle shop and his separate residence, located on the Choctawhatchee River. Robert has lived and worked on the property for many years, and has been your friend for many years. He has grown tired of resurrecting the property annually because the river floods, damaging both buildings and the land. He does such a good job repairing the damage that one unfamiliar with the property would never know that the buildings were lower than the Code required, or that they had ever flooded. Robert is frustrated and wants to sell. As his close friend, you know all of the above.

Robert has a real estate broker friend who finds a buyer. The buyer is a retired lawyer who knows everything about most everything, but nothing of the property’s history. Robert tells you that no one told him about the annual flooding when he bought the property, that he is tired of being the fall guy, and that it’s only fair for him to recover the cost of his repairs. He feels entirely justified in saying nothing to the buyer of his annual heartache and effort.

You are advising Robert. What do you advise him that he must disclose, if anything and why?

Robert is required by law to disclose any facts that would materially affect the value of residential property. (Remember Johnson v. Davis, from last month’s article). One of the buildings is on the property where Robert resides. The annual flooding affects that property’s value. Therefore, Robert is required by law to disclose that the residential part of the property floods regularly and has required annual rebuilding.

The courts have said that Robert is not required byJohnson v. Davis to reveal facts regarding commercial property. But, intentional deception is fraud if relied on by the purchaser. If Robert doesn’t disclose those facts, the buyer will surly find out about his most recent rebuild of the property and say that it was really an effort to mask the annual flooding. Therefore, Robert should disclose the annual flooding of the entire property, or when the clerk announces, “will the defendant please rise?”, be prepared to stand.

Hang on to these facts. My next article will ask, what advice do you give your friend the real estate broker, and why? Then the grandfather question: what advise do you give yourself, the lawyer, when you are asked to prepare a contract, close the deal, write title insurance, and go to dinner to celebrate the deal?