Do Homeowners Have A Duty To Disclose Potential Eminent Domain Proceedings When Selling Their Property?

In many cases, property owners become aware that eminent domain proceedings will affect their property, but owners are often surprised to learn how long the process takes.  Major government projects can take years of budgeting, engineering, and planning before the first parcel is ever taken by eminent domain. Early in this process, the construction plans may change and owners can be left uncertain as to whether their property will be affected at all.  Property owners facing eminent domain often wish to sell their land before it is taken by the government. This avoids much of the uncertainty and stress associated with eminent domain.  Many of those property owners ask us if they have a legal duty to disclose to potential buyers that their property is scheduled to be taken by the government. While there is no clear answer in Florida, the best practice is to err on the side of caution and to disclose that information. When in doubt, owners should disclose any information that will materially affect the value of the property.

A seller should not rely solely on public records and other readily observable information to fulfill their duty to disclose eminent domain proceedings that could affect the value of a property for sale.

Seller Beware

Florida does not follow the common law doctrine of caveat emptor, or buyer beware.  See Johnson v. Davis, 480 So. 2d 625 (Fla. 1985).  In fact, Florida law recognizes causes of action based upon “fraudulent concealment” and “fraudulent nondisclosure,” which are essentially deemed the same. Id.; see also Solorzano v. First Union Mort. Corp., 896 So. 2d 847, 848-849 (Fla. 4th DCA 2005). In Johnson v. Davis, the Florida Supreme Court established that “where the seller of a home knows of facts materially affecting the value of the property which are not readily observable and are not known to the buyer, the seller is under a duty to disclose them to the buyer….” Johnson, 480 So. 2d at 629.  The question then becomes whether a potential eminent domain taking is a readily observable or knowable fact that materially affects the value of the property.

Are Eminent Domain Projects “Readily Observable”?

Whether eminent domain projects or plans are “readily observable and are not known to the buyer” is a question of degree.  In the event that there are signs posted in front of the property or a development and the buyer visits the house and sees the signs, then a seller most likely does not have an obligation to disclose the plans. If the plans for the project are not so obvious, but rather filed in the public records, the law is less clear.

In addressing the issue, one court observed that “[t]he law should not expect every potential homeowner in every case to root around the bowels of the courthouse for those surveys, plats, and records which would verify or contradict a seller’s representations about the property.” Azam v. M/I Schottenstein Homes, Inc., 761 So. 2d 1195, 1197 (Fla. 4th DCA 2000), aff’d 813 So. 2d 91 (Fla. 2002).  This comment is in line with the framework established in Johnson v. Davis because it considers the degree of difficulty in discovering the potential eminent domain proceedings.

The Whole Truth And Nothing But The Truth

Even if a seller does not have a duty to disclose a certain fact, a seller may not pick and choose which facts to disclose.  In Ramel v. Chasebrook Constr. Co., 135 So. 2d 876, 882 (Fla. 2d DCA 1961), the court explained that “even though a party to a transaction owes no duty to disclose facts within his knowledge, or to answer inquiries respecting such facts, if he undertakes to do so he must disclose the whole truth.”  In sum, if a seller doesn’t have a duty to disclose a potential eminent domain taking, a duty may nonetheless arise if the seller makes representations regarding potential development or land use regarding the property.

Examples In Florida Case Law

In addressing whether a seller has a duty to disclose governmental condemnation plans, one court answered that question in the negative. Hauben v. Harmon, 605 F.2d 920 (5th Cir. 1979) (applying Florida law). Hauben arose out of an agreement to purchase 834 acres of land in Florida. Id. at 922. The land was partially a swamp flood retention area subject to condemnation for flood control purposes. Id. Despite several communications between the seller and the water management district wherein the seller learned of the district’s plans to condemn the land, the seller never disclosed this information to the buyer. Id. at 924. The court noted that “the buyer and sellers apparently had equivalent access to the information concerning the property” because it was within the public records.  Id.  Further, the court explained that the condemnation may never actually take place and that “mere statements of possibilities do not generally constitute false statements of material fact.”  Id.

In Azam, the Court reviewed a purchase of a residential home located next to a parcel of land that the local school board had decided to develop.  761 So. 2d at 1195–96.  The seller told the buyer that the land was a “natural preserve” despite knowledge of the school board’s plans.  Id.  Despite the plans being in the public records, and thus available to the buyer, the court allowed the buyers to present their case to the jury.  Id. at 1196.  On appeal, the Florida Supreme Court approved of the Fourth District’s reasoning.  Azam, 813 So. 2d at 96.

Other States: Duty To Disclose Eminent Domain Proceedings                     

There is a wide range of how other states decide the issue of whether a seller of real property has a duty to disclose that the property may be subject to eminent domain in the future.  In some jurisdictions, including New York and Iowa, publicly available records or plans negate the duty to disclose.  The reasoning behind this is that the information is readily observable through ordinary due diligence.  Other states reach the same conclusion, that the seller does not have a duty to disclose future eminent domain, because the possibility of eminent domain proceedings is not a fact.  In order to trigger the duty to disclose, those jurisdictions, including the District of Columbia and Maine, require the condition to be a material fact.  Some other states limit the disclosure requirement to only significant takings.

Overall, the duty to disclose is not uniform throughout the country and sellers must pay careful attention to both relevant statutes and court opinions.

Conclusion

While there is some precedent to rely upon, Florida law is not entirely clear on whether a seller has a duty to disclose knowledge that their land is subject to eminent domain plans.  However, there is a pattern in the case law that indicates that sellers may not be required to disclose an eminent domain project for two reasons: (1) eminent domain projects are often published in the public records, making them “readily observable” to the buyer; and (2) the mere possibility of future eminent domain taking—especially where the future project plans can change—may not arise to the level of a “material fact” affecting the value of the property.

Despite these factors that may weigh in favor of the seller’s ability to withhold disclosures regarding eminent domain projects, sellers should always consider the possibility that a buyer could still assert a fraud claim against the sellers at a later date.  Without more definitive case law, Florida sellers are encouraged to disclose all facts materially affecting the value of the property, including disclosure of any known eminent domain plans.


Authors:
Brandon C. Meadows, Esq.
Evan R. Reid, J.D. Candidate


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