A “FLIPPER’S” FAILURE TO DISCLOSE WATER INTRUSION AND MOLD GROWTH – INSTEAD OF SELLING A HOME, THE FLIPPER BUYS A LAWSUIT
CORAL SPRINGS, November 21, 2016 – Florida law requires the seller of a residential property to disclose to the buyer facts materially affecting the value of the property which are not readily observable and unknown to the buyer. Failure to discharge this duty of disclosure is deemed to be fraudulent concealment. Thus, the Florida Supreme Court recognizes a cause of action for fraudulent nondisclosure in connection with real estate transactions. Florida courts have extended the duty of disclosure to a seller’s real estate broker. This broker duty has been adopted by the Florida Legislature and codified as part of Florida Statute 475.278.
Attorney Scott Gelfand specializes in real estate and mold law. He notes that he has seen a dramatic increase in cases brought by homeowners against sellers and their realtors who fail to disclose water leaks and mold growth that buyers discover after having closed on the purchase of their new home. Mr. Gelfand notes that the problem is particularly rampant in “flip” cases, where an investor buys a downtrodden home for a discount, renovates it, and then sells it for a profit to the unwitting buyer without disclosing the home’s previously dilapidated condition.
According to RealtyTrac®, the nation’s leading source for comprehensive housing data, 6.6 percent (43,740) of all single family home and condo sales in the first quarter of 2016 were flips, a 20 percent increase from the previous quarter and up 3 percent from a year ago to the highest rate of home flips since the first quarter of 2014. Nevada and Florida, where the share of distressed homes are still relatively high, are still seeing the most flipping action.
A home flip is defined as a property that is sold in an arms-length sale for the second time within a 12-month period.
Senior vice president Daren Blomquist of RealtyTrac® indicated that an important reason for the popularity of “flipping” is the ubiquity of reality TV shows that make flipping seem like an easy way to earn big money. “They believe that those reality shows actually have some truth to them,” he told Fortune magazine.
While there can be profit to be made, the flipping process is much harder than a single television episode makes it seem. According to RealtyTrac, the average flip takes six months to complete and out of the gross profit comes rehab expenses, marketing, real estate agent commissions, and other costs to upgrade and hold the home until it sells. Thus, there exists strong financial incentive to refrain from disclosing prior leaks, mold growth, and other warts in the home which could torpedo sales or reduce the selling price.
There can be no better real-life example of the dangers of a buyer’s purchase of a “flipped” home than a lawsuit brought by Mr. Gelfand in Broward County Circuit Court on behalf of Lighthouse Point resident Ed Weber.
The suit arises out of the mold infestation of Weber’s Lighthouse Point home which, he alleges, was covered up by the defendant “flipper” by painting over all interior walls to hide signs of water intrusion and mold growth which were never disclosed to Weber by the “flipper.” Weber became increasingly ill after purchasing the home, as the water intrusion and mold growth began to bleed through the coating of paint intended to cover it up.
The suit alleges that, as a result of inhaling the mold-infested indoor air in the home, Weber has suffered severe adverse health consequences including “chronic coughing, chest congestion, wheezing, shortness of breath, exacerbation and/or onset of asthma, allergic rhinitis, secondary upper respiratory infections, rashes, prolonged fevers, fatigue and myalgia, chronic vertigo, hearing loss, Tinnitus, aural fullness, and, upon information and belief, Meniere’s disease.
Mr. Gelfand stated that industrial hygiene experts have already isolated and identified the various species of mold found in the house and that mold health experts have examined Mr. Weber and have attributed his health symptoms to the mold in his home. “This case is all too typical in Florida and elsewhere where “flipping” has become a popular home investment occupation” stated Mr. Gelfand. He went on to state, “All Florida homebuyers should be extremely careful when purchasing a “flipped” home, and should insist upon complete disclosure of water leaks and potential sources of mold growth.”