Investing in commercial real property means making a major financial investment. Residential sellers in Florida often have broader disclosure duties (including court-recognized duties to disclose certain latent defects). Commercial transactions, however, are often governed by the contract and “caveat emptor,” or “buyer beware.”
Because buyers bear the burden of discovery, rigorous due diligence is essential.
The limits of “buyer beware”
Commercial sellers often have no general duty to volunteer information about a property’s condition. However, Florida law provides important limits where liability can arise from misrepresentation, active concealment and other fraud-based conduct. Further, the contract can create specific disclosure and investigation rights. Even in an “as-is” sale, a seller generally cannot avoid liability for intentional misrepresentation or active concealment.
- Active concealment: Sellers may not take deliberate steps to hide known defects. For example, painting over a recurring mold issue, can create legal liability.
- Misrepresentation: If a seller makes a false statement regarding square footage, environmental contamination or zoning compliance, and the buyer is harmed, caveat emptor generally will not shield the seller.
- Contract-based investigation and disclosure rights: Commercial buyers must negotiate robust investigation rights, including a due diligence period for environmental and structural reviews. Buyers should negotiate inspection and access rights; once agreed to in the contract, the seller must provide the access described.
Most commercial contracts include representations and warranties buyers can negotiate. If a seller signs a contract promising that there are no known liens or structural issues, they have a legal obligation to be truthful about what the contract covers.
Honest answers about other concerns
Florida does not generally require that sellers disclose stigmatizing information about properties. They don’t have to tell buyers if there is a history of failed businesses at the property. They do not need to advise them that a previous tenant vacated under unpleasant circumstances or that there are rumors regarding future competition in the area.
However, if buyers make inquiries about specific operational, zoning or environmental details, sellers have an obligation to answer honestly. Buyers should ask sellers specific questions (ideally in writing) about concerns that could affect the deal.
The importance of the commercial contract
Commercial contracts are not one-size-fits-all. Reviewing contracts and environmental reports with a skilled legal team can help commercial buyers allocate risk properly and determine whether sellers may have intentionally misrepresented a property.
