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Are Sellers Liable for Misrepresenting the Condition of Commercial Property?

The legal doctrine of caveat emptor — “let the buyer beware” — means that buyers are responsible for inspecting the quality and condition of property prior to purchase. If they fail to do so, they usually cannot hold the seller liable for any defects, even those that the seller did not disclose. Although Florida law is more protective of residential property buyers, a recent court ruling shows that caveat emptor is alive and well when it comes to commercial real estate transactions.

In Florida Holding 4800, LLC v. Lauderhill Mall Investment, LLC, the buyer purchased a commercial property and then sued the seller after discovering that the roof leaked, the HVAC system didn’t work and the building was full of mold. The buyer alleged that the seller misrepresented the property condition and actively concealed the problems. The sales contract stated that property was being sold “as is” and that there were no representations or warranties from the seller.

The trial court ruled in favor of the seller and the Fourth District Court of Appeal affirmed, pointing to contract language stating that the buyer made the purchase based solely on the buyer’s own inspection, investigation and evaluation and that the seller made no representations regarding the property’s condition. “By these very terms, Buyer waived any claim of fraud,” the court concluded. In other words, the buyer could have inspected the property and canceled the deal if a defect were found, but the seller was not responsible for defects that the buyer should have discovered.

The lesson from this case is that if commercial real estate buyers fail to inspect properties prior to purchase, they should not expect to be let out of the deal except in very limited circumstances. In Florida, there are only three exceptions to caveat emptor for commercial buyers:

  1. Where the buyer was prevented from independently inspecting the property due to a trick or artifice
  2. Where the buyer does not have an equal opportunity to become apprised of a material fact
  3. Where the seller attempts to disclose facts about the property and fails to reveal the whole truth

In practice, it is difficult for a buyer to prevail based on these exceptions because they require proof that the seller actively tried to prevent the buyer from finding out the true condition of the property. Furthermore, if the seller makes oral representations to the buyer, “as is” language generally overrides those statements. No matter what the seller says, the buyer has the inherent right to inspect the property and to cancel the sale prior to closing if the land or building is unsatisfactory to them.

H. Clay Parker, Esq. handles a wide variety of commercial real estate matters in Central Florida. We provide a 30-minute initial consultation to potential clients for only $50. You can reach our Orlando law office by calling 407-216-2504 or contact us online to arrange a meeting.

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