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THE EFFECT OF CITRUS CANKER ON THE DISCLOSURE REQUIREMENTS FOR THE SALE AND PURCHASE OF COMMERCIAL AND RESIDENTIAL REAL ESTATE

Published: January 5th, 2006

By: Dennis G. Corrick Laura Minton Young

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The presence of or exposure to citrus canker poses a serious concern to commercial citrus growers, residential property owners and purchasers of the same. Florida courts have in the past endorsed what is referred to as the Caveat Emptor or “buyer beware” position regarding the extent of what a seller of property was required to disclose to a prospective purchaser. The burden was routinely placed on the purchaser to determine or reveal any defects or material issues with the property, short of the seller actively concealing a defect. However, prudent sellers and purchasers need to be aware that recent Florida cases have indicated a marked decline in the caveat emptor position that has in the past protected sellers from failing to disclose material defects of the property prior to purchase.

The Florida Supreme Court in Johnson v. Davis, 480 So. 2d 625 (Fla. 1986), held that a seller is under a duty to disclose known facts that materially affect the value of the property which are not readably observable or obvious and are not known to a purchaser, (“latent” defects). The Court further noted that the trend for disclosure is heading in the direction of requiring full disclosure by sellers of all material facts. Florida courts have increasingly followed the Supreme Court’s holding in Johnson as it applies to residential property in either contexts. The disclosure requirements have been extended to developers and contractors of residential real property.

The infection or exposure of citrus canker to trees located on residential property is a defect of which a purchaser may not be aware and which is not readably observable. If a residential seller knows that a property has infected trees or exposed trees, then the seller must disclose that fact to the prospective purchaser prior to closing. If a seller is not specifically aware of any exposure or infection of citrus canker, but the possibility exists, a general disclosure statement, similar to the statement below, would be prudent in any contract for the sale and purchase of residential real property.

CITRUS CANKER DISCLOSURE: Citrus canker is a plant disease, spread through air, that commonly affects citrus trees and other similar plants, but that has no effect on humans or animals. All infected trees and those exposed to the disease within a 1,900 foot radius are required to be eradicated pursuant to Florida’s Citrus Canker Eradication Program. Citrus canker has been found in numerous areas in Florida and has become an increasing problem for the state. Additional information regarding citrus canker and citrus canker exposed areas and testing may be obtained from your local Citrus Canker Eradication Program.

Though Florida courts have failed to extend the full disclosure requirements of Johnson to the sale of commercial property, sellers should be aware that it is the trend of case law to limit the doctrine of caveat emptor for the sale and leasing of commercial property. As with residential property, sellers of commercial property are under no duty to disclose patent defects, defects which are obvious and that a purchaser could readably determine. The duty of purchasers to investigate commercial property and to discover patent defects is usually higher than for purchasers of residential property. Consequently, what is considered a patent defect differs for residential versus commercial property. If the presence or exposure of citrus canker on commercial property is a defect that a purchaser could readably discover during its due diligence period, it may be considered a patent defect which the seller has no duty to disclose, unless the seller has actual knowledge that its trees are infected or have been exposed to citrus canker. In order to avoid a court determining that citrus canker was a defect which required disclosure, a prudent seller should include a general disclosure in all sales contracts for the purchase and sale of commercial property much to the same effect as the general citrus canker disclosure above. A statement advising a prospective purchaser to perform any tests necessary to determine if citrus canker exists on the property could also be added as an additional testing procedure recommended in the Due Diligence provision of a contract.