Naples commercial litigation lawyers

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Can I cancel a contract to buy real estate before closing?

ANSWER.

Florida statutes require disclosures specific to the type of property you are buying, and give different ‘RIGHT TO CANCEL’ periods.


Example
:
Condominium purchase from a Developer.

Until such time as the developer has furnished certain documents (‘disclosure materials’)* to a person who has entered into a contract to purchase a residential unit, the contract may be voided by that person, entitling the person to a refund of any deposit together with interest thereon. [*This is a much longer laundry list than people generally realize].

You, the buyer or purchaser, may rescind within 15 days from the date you receive ALL condominium documents AND AGAIN within 15 days from the date you receive any material modification of those documents which adversely or detrimentally affects you, (or prior to closing, whichever is first).

So, for example, if you haven’t been given a certain required document yet, you might have a right to cancel.

If you are receiving an amendment, you can only cancel if that amendment hurts you.

ALSO KEEP IN MIND: Condo developers are required to comply with many technical filing and escrow requirements. The developer’s failure to comply may give rise to Buyers’ right to void/cancel their contract. For instance, there are additional disclosures or warnings

which must be made in the body of the purchase and sale agreement itself.
Failure to include such warnings or caveats, particularly regarding use of escrow monies/funds is a ground to void (rescind or cancel) the contract.


Example
:
You receive Condominium Amendments OR you learn there are Covenants, restrictions, easements, By Laws, rules or other relevant documents, which you did not receive with your original package OR you become aware of a
significant change in the condominium itself.

You, the buyer or purchaser, may rescind within 15 days from the date you receive any material modification of the condominium documents which adversely or detrimentally affects you (or prior to closing, whichever is first). The Developer is REQUIRED to give you a ‘written statement’ advising you of those rights when they deliver the amendments to you.

So, for example, if you haven’t been given a certain required document yet, you might have a right to cancel.

If you are receiving an amendment to condo documents you already received, you can only cancel (rescind your agreement) if that amendment hurts you. Often the cover letter from the developer will say that the amendments are not material or adverse. That reflects the developer’s view. You should make an independent assessment!! If you are in doubt and/or need more time, it may be safer to exercise your right to rescind BEFORE THE FIFTEEN (15) DAYS RUN OUT. To learn more about Rescission options, contact us online or call 239-963-1791 or toll free 866-504-8981.

A word to the wise:
If you are a Purchaser, don’t take legal advice from the Seller/Developer. If you are a Seller, don’t take legal advice from the Purchaser. Each party will honestly see the situation through the prism of their own interests. A court may see it differently.

Example: Condominium purchase from individual.

You may rescind within 3 business days of receiving the condominium documents, or prior to closing, whichever is first.

Example: Homeowner Associations.

If the property is subject to assessments which can result in liens, you must be given a Disclosure Summary pursuant to Florida Statute ยง720.401. You then have 3 days to rescind from receipt of the Disclosure and your contract should say that.

If the Seller failed to give you the Disclosure Summary Statement (properly filled out and signed by the Seller), the purchaser may void the contract by delivering written notice before receiving the disclosure summary or within three days after receipt of the disclosure summary or prior to closing, whichever first occurs.

Example: Fraud

If the Seller has made deliberate material misrepresentations to you about the property and you relied on them and suffered damage, you can seek to rescind (BEFORE OR AFTER CLOSING) on the basis of fraud.

Example: Failure to disclose facts which materially affect the value of the property. (Yearly flooding, rotted roof, sewage treatment plant going in next year across the street, etc)

This is a different standard than fraud! 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. If Seller fails to do so, Buyer may rescind, EVEN AFTER CLOSING and even in an AS IS purchase.

If the Seller has made inadvertent misrepresentations or failed to disclose things which materially affect the value of the property, you may rescind. You don’t have to prove the statements or lack of disclosure was deliberate or malicious – it’s enough that something wasn’t disclosed, BUT, it must be something important.

Example: Federal Law

There are instances where a failure to comply with certain federal laws, such as the Interstate Land Sales Full Disclosure Act.[15 U.S. C. 1701 et seq or ILSA for short], may provide a right to rescind and receive a FULL refund of purchase monies, even up to two (2) years after contract (BEFORE OR AFTER CLOSING). ILSA applies to ‘lots’ in ‘subdivisions’, terms which are defined broadly and can sometimes apply to scattered units ILSA can also apply to commercial, office or industrial properties. Many Florida developers take steps to exempt their projects from these laws. However, if the developer has not properly qualified for the exemption and/or their sales contract doesn’t meet certain standards, a Court may find the exemption inapplicable and permit rescission.

It is important to act timely here. It is better to investigate your legal rights under the Interstate Land Sales Full Disclosure Act BEFORE the expiration of two years from the date you signed the contract. DON’T WAIT.

Florida state and federal courts may differ from the HUD Guidelines in interpreting and applying ILSA (Interstate Land Sales Full Disclosure Act 15 U.S. C. 1701 et seq; or ILSA for short), to Florida real estate transactions. Therefore, it’s wise to check with our office or other Florida counsel. [HUD stands for the U.S. Dept of Housing and Urban Development. See http://www.hud.gov/offices/hsg/sfh/ils/ilsexemp.cfm].

CONCLUSION

There may be other situations in which you can rescind. This is not meant to be comprehensive.

There are also limited circumstances in which a buyer can void or revoke a purchase of Florida real estate even AFTER closing.

Remember, as a point of general contract law, you can usually withdraw your offer to purchase or sell real estate anytime before the other party accepts and delivers to you (or your agent) a copy of the contract signed by said party. You should do this in writing. This is also true if they made changes (a counter offer) on their signed acceptance.

One mistake many home buyers make is to wait to consult counsel until after a developer has failed to meet a completion obligation, such as the common two year construction (build-out) completion commitment. DO NOT DELAY until after the two year period runs, you may lose valuable rights under ILSA. The limitations period for ILSA (Interstate Land Sales Full Disclosure Act) is three years. In other words, you should generally properly revoke within two years and, if monies are not returned, a law suit must be filed within three (3) years after the date the purchaser executed the contract.

Rights of action under Florida state law may have longer periods.

To learn more about Disclosure requirements and Rescission options, contact us online or call 239-963-1791 or toll free 866-504-8981.

These are generalizations only! Consult a Florida attorney for specific advice. Our office [239 262-2874] serves Collier and Lee counties (includes Naples, Fort Myers, Bonita Springs, Marco Island, Cape Coral, Estero) and can sometimes assist in other geographic areas. March 2008

~ FLORIDA ONLY – January 2012~

BV Distinguished is an excellent rating for a lawyer with some experience. A widely respected mark of achievement, it differentiates a lawyer from his or her competition.

Represent Clients from

Celia Deifik in Naples, Florida, represents clients in Naples as well as Marco Island, Fort Myers, Bonita Springs, Cape Coral, Estero and other communities in Collier County and Lee County.

Celia Ellen DeIfik, of Ross, Lanier & Deifik, P.A.

Celia Ellen Deifik
TIB Financial Center
599 Ninth Street North
Suite 300
Naples, FL 34102

Phone: 239-963-1791
Toll Free: 866-504-8981
Fax: 239-262-2627

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