What Is Constructive Fraud?
In a standard fraud lawsuit (actual fraud), the plaintiff must prove that the defendant intentionally lied or deliberately hid the truth to steal money. Constructive fraud is unique because it does not require proving malicious intent.
Under Florida law, constructive fraud occurs when someone breaches a special position of trust (a fiduciary duty) through severe negligence or conflict of interest. Even if the person did not mean to cause harm, the law treats their failure to act responsibly as fraud because of the power imbalance in the relationship.
Constructive Fraud in Real Estate
This cause of action frequently arises in real estate transactions involving licensed professionals or family members who hold power of attorney:
- Real Estate Brokers — A real estate agent has a fiduciary duty to their client. If an agent advises their client to sell a house for $300,000, and the agent's secret business partner immediately buys it and flips it for $500,000, the client can sue the agent for constructive fraud. Even if the agent claims they didn't intend to scam the client, their failure to disclose the conflict of interest breaches their duty.
- Title Examiners — If a title agent conducts a sloppy title search and fails to report a massive lien on the property, and the buyer loses their home to foreclosure, the buyer may sue for constructive fraud due to the agent's gross negligence in their professional duty.
- Estate Planning — If an adult child uses a Power of Attorney to transfer their elderly parent's real estate into their own name—even if they claim they did it to "protect the house from nursing home bills"—the other siblings can sue for constructive fraud to void the deed.
The Legal Remedy
Because constructive fraud relies on a breach of duty rather than a deliberate lie, it is often easier to prove in court than actual fraud. The typical legal remedy is rescission—the judge will completely cancel the fraudulent contract or void the deed, returning the property to the victim as if the transaction never occurred.
Related Terms
- Fiduciary Duty — The legal relationship of trust required for constructive fraud
- Cause of Action — The legal theory used to file the lawsuit
- Deed — The document often voided when constructive fraud is proven
Barnes Walker Real Estate Litigation
Barnes Walker's trial attorneys fiercely prosecute claims of constructive fraud against real estate professionals and fiduciaries who abuse their positions of trust, seeking to void illegal property transfers and recover our clients' assets. Request a legal inquiry for assistance.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC