Real Estate

Implied Warranties When Selling Residential Real Property

When purchasing residential real property, purchasers and sellers should consider warranties that the seller will provide to the purchaser. Typically, warranties are expressly stated in the contract the purchaser and seller negotiate. However, new home builders who sell residential real property provide certain minimum warranties to the purchaser, regardless of whether or not those warranties are included in the contract. It is important to recognize these warranties exist and that new home builders may disclaim certain aspects of the warranties using the correct contract language. 

Warranties that are included in the sale of property or goods that are not included in the contract are known as implied warranties. There are several implied warranties that Florida courts applied to the sale of residential real property. These include: (1) the implied warranty to construct according to plans; (2) the implied warranty to construct in a workmanlike manner; and (3) the implied warranty of habitability. 

The implied warranty to construct according to plans concerns a warranty from the builder of a new home to the purchaser that the purchaser’s new home has been built according to the specifications outlined in the building plans. This is breached when the builder failed to construct the building according to those construction plans and the purchaser suffered damages as a result of that failure. 

The implied warranty construct in a workmanlike manner means that the home is constructed in a manner that is in accordance with the accepted norm of the industry. This warranty may be breached when the builder sold construction materials and workmanship, had a reason to know the particular purpose for the construction, the purchaser then relied upon the builder’s skill or judgment for the construction, and then the final product was defective and the purchaser suffered damages as a result. 

Finally, the implied warranty of habitability warrants that the newly constructed residence does not contain any latent defects that would make the residence unfit for living within. A breach of this warranty may occur when a purchaser takes possession of a new residence and a latent defect in the residence makes the premises uninhabitable. 

So, what if the seller of a home wants to preclude certain aspects of an implied warranty? Under Florida law, the seller and purchaser may exclude certain and specific items from an implied warranty through a disclaimer with clear and unambiguous language that clearly reflects both parties’ expectations as to what items are not warranted. This means that general or broad disclaimers of implied warranties are not effective to disclaim specific items covered in an implied warranty. 

Most of the law regarding implied warranties is not contained in the Florida Statutes, but rather is case law created by judges in different judicial circuits throughout the state of Florida, making the rulings on implied warranties inconsistent throughout the state. As always, when preparing contracts involving real property, it is important to consult with an attorney about important issues such as implied warranties. 

What to Consider When Appointing a Fiduciary?

A well-crafted estate plan will require a person to appoint individuals or financial institutions to represent them in the event they: need assistance with their affairs during their lifetime, lose capacity, or after death. Being a fiduciary is a very time intensive and intellectually challenging task to put upon an individual. The common fiduciary positions that your estate planning lawyer may ask you to name are as follows:

  • Personal Representative: appointed by a Court to administer your estate when you die;
  • Agent-In-Fact (under a durable power of attorney): manages your financial affairs during your lifetime;
  • Health Care Surrogate: makes health care decisions for you during your lifetime;
  • Trustee of a trust document: administers the terms of a trust that you have created;
  • Guardian: makes health care and financial decisions for you in the event that less restrictive alternatives are ever deemed insufficient by a Court during your lifetime; and
  • Guardian for your minor children: makes decisions for your children in the event you pass away or lose legal capacity before the children become legal adults.

The individuals or financial institutions that you choose to serve in these various fiduciary roles will have substantial responsibilities that will require them to make decisions  or act actions on your behalf such as follows:  apply for government benefits; make health care decisions; manage and invest your assets and income for your benefit (or others as you have chosen); decide where you will live; work with attorneys,  financial advisors, and accountants; and distribute your assets upon your passing.

Often times a person will name their spouse or their oldest child as their fiduciary because they assume that its typical for estate planning, but some more thought should go into these decisions and you should consider the following questions:

  • Does this person have the education, experience, and skillset to manage my financial affairs?
  • Is this person too busy to take the time to serve as a fiduciary for me?
  • Can this person make a difficult decision regarding my health care?
  • Would this person make the same health care decisions that I would make for myself?
  • How close does this person live to me?
  • How old is the person I am appointing and will they be around to serve as my fiduciary in the future?
  • Will appointing this person create a divide amongst other family members?
  • Does the size of my assets and income require a professional such as my accountant or a financial institution to manage?

The above are just a few items to consider about when choosing fiduciaries to name in your estate planning documents.  However, only you know who the right person(a) or financial institutions are for you in these fiduciary roles. I recommend spending a little time considering which person(s) or financial institutions are right for you prior to meeting with your estate planning attorney.

Real Estate

Borrowing Money Secured by Real Estate

When borrowing money to acquire or refinance real property in Florida, the lender will prepare an entire loan package for you to sign at closing. The two main documents in the loan package are the promissory note and the mortgage. The promissory note creates the primary contractual obligation for you to repay the loan to the lender. Generally, the note will include things like the amount that you are borrowing, the term of the note, the interest rate being charged and the amount of your payments. You will want to look carefully at other provisions of the note that could impact repayment, such as late charges, default interest rate and prepayment provisions.

The mortgage secures repayment of the promissory note. It will be recorded in the public records of the county where your real property is located. The mortgage will typically have representations and warranties that you make to the lender regarding you and your ownership of the property. Additionally, the mortgage will have covenants with which you will be required to comply as long as your loan is outstanding. Typical mortgage covenants include things like maintaining the property, keeping the property insured and paying the real estate taxes. According to Florida law, a mortgage only grants a consensual lien on the real property in favor of your lender and is not deemed to be a conveyance of the legal title or the right of possession; however, the mortgage will also contain default provisions and what the lender’s remedies are in the event of a default. A typical remedy is judicial foreclosure of the lien, which could result in the lender ultimately owning your property if you do not repay the loan.

Promissory notes and mortgages are subject to documentary stamp taxes in Florida. These documents are taxed at a rate of 35 cents per $100, or any fraction thereof, of the amount of the indebtedness indicated in the document. Mortgages are typically also subject to a nonrecurring intangible tax imposed at the rate of 2 mills (.002) on each dollar secured by the mortgage. Note that some mortgages, such as those in favor of a credit union, are exempt from the intangible tax.

One of our experienced attorneys can help you with your loan questions, as well as closing your real estate transactions.