What Is Caveat Emptor?
Caveat emptor ("let the buyer beware") is a centuries-old common law doctrine. Historically, it meant that a buyer purchased real estate entirely at their own risk. If the buyer closed on a house and later discovered the roof leaked, the seller was not liable; it was the buyer's fault for not inspecting the roof thoroughly enough before handing over the money.
While caveat emptor still broadly applies to commercial real estate transactions in Florida, its application to residential real estate has been drastically restricted by the Florida Supreme Court.
The Johnson v. Davis Exception
In 1985, the Florida Supreme Court issued a landmark ruling in the case of Johnson v. Davis, fundamentally altering the doctrine of caveat emptor for residential property sales. The court ruled that it is no longer strictly "buyer beware."
Under the Johnson v. Davis standard, a residential home seller has an affirmative legal duty to disclose any facts known to them that materially affect the value of the property and are not readily observable to the buyer. If a seller knows the house floods during heavy rain and fails to tell the buyer, the buyer can sue the seller for fraud or breach of contract, even if the house was sold "As-Is."
Caveat Emptor in Commercial Real Estate
Unlike residential buyers, commercial real estate investors are considered highly sophisticated parties. Because of this, Florida courts still strongly enforce caveat emptor in commercial transactions. A commercial buyer is expected to conduct exhaustive due diligence, hire structural engineers, and thoroughly investigate the property. If a commercial buyer purchases a warehouse and later finds severe structural issues they missed during inspection, they generally cannot sue the seller for failing to disclose the defect.
Related Terms
- As-Is Contract — A contract format that still requires residential defect disclosure
- Cause of Action — The legal basis used to sue a seller who hides defects
- Contract — The purchase agreement governing the transaction
Barnes Walker Property Litigation
Barnes Walker's litigation attorneys frequently represent residential buyers who have been defrauded by sellers hiding material defects, utilizing the Johnson v. Davis standard to overcome caveat emptor defenses. Request a legal inquiry for assistance.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC