Real estate professionals must provide full disclosure of all material facts that impact the appeal and value of a property their clients seek to purchase. Clients who claim the real estate agent or broker failed to act in good faith or was negligent in discharging their duties are likely to seek remedy by filing lawsuits that lead to costly legal defense fees.

The Claim

A Florida real estate agent sold a beach property to a couple who purchased the property for short-term rentals. The clients expressly stated they only wanted to buy a house to rent at a short-term weekly rate. The agent acknowledged this specific requirement and agreed only to show the couple houses they could lawfully rent on a short-term basis. The agent found a property and advised the buyers that the property could be rented on a short-term basis.

Based on the real estate agent’s assurance of short-term rental viability, the couple purchased the property. After closing the sale, the couple immediately began advertising the property for a one-week rental and deriving income from the rentals. A few months after the deal closed, the county sent the couple a notice citing a violation of county code that states short-term (defined by county code as any period shorter than 30 days) rentals of the property were not permitted. The county’s cease-and-desist order required the couple to stop renting the property immediately. This type of limitation is common within planned communities governed by HOAs. Here is a link to an HOA-related story.

What Went Wrong

In this case, it was incumbent on the real estate agent to know county code prohibited short-term rentals. Instead, the agent advised the buyers that the beach property they bought could be rented on a short-term basis, which was their primary concern and reason to purchase it. Because the buyers lived out of state, they were more reliant upon their real estate agent than locals seeking help to find a home suitable for weekly rentals.

The buyers claim the agent did not perform any reasonable attempt to research county code regulations regarding short-term rentals. The agent’s actions in improperly advising them they could rent the property weekly was a breach of duty. The buyers assert renting a house on a short-term basis is not a complicated matter of zoning law but rather a fundamental matter that any reasonably competent, nonnegligent realtor practicing in the county would and should know.

The lawsuit continues; should the dispute not be resolved; the agent and real estate company face liabilities of more than $15,000. As a shield against claims of negligence, real estate agents must investigate particulars of a home they are listing – including any county code that would have a significant impact on the decisions of buyers to purchase a rental property.

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