Florida Real Estate Principles, Practices & Law > Chapter 11 (Real Estate Contracts) > Flashcards
Chapter 11 (Real Estate Contracts) Flashcards
Real estate licensees are allowed to assist buyers and sellers with the drawing of four types of contracts
What are they?
- Listing agreement. A listing agreement is a broker’s employment contract with a seller. Typically, it is the sales associate who obtains the listing on behalf of the broker.
- Buyer brokerage agreement. A buyer brokerage agreement is an employment contract with a buyer.
- Sale and purchase contract. A sale and purchase contract is a contract between a buyer and a seller. If the licensee acts as agent or facilitator for one or both of the contracting parties, the licensee may prepare the sale and purchase contract.
- Option contract. An option contract is an agreement to keep open for a specified period of time an offer to sell or lease real property. In order to reduce liability, licensees are strongly advised to recommend to the buyer or the seller to have a real estate attorney draw option contracts (Option Contracts are discussed in detail later in this unit).
Essentials of a Contract
- Competent parties
- Offer and acceptance (mutual assent)
- Legal purpose
- Consideration
What is a Contract?
An agreement between two or more parties to do a legal act for a consideration, which creates certain rights and obligations.
Contracts may be in writing or oral. However, contracts that involve a transfer of real property must be in writing to be legally enforceable.
The parties to an oral real estate contract may have a valid contract (one that contains all the essential elements), but the contract will not be enforceable in a court of law if it is not in writing.
There are two exceptions to this requirement.
What is a Valid Contract?
Contracts that have four essential elements: competent parties; mutual assent; legal purpose; and consideration.
Unenforceable Contract
A contract would not stand up in a court of law because it does not meet the requirements of the statute of frauds or it runs beyond the statute of limitations.
A contract may be unenforceable because it is not in writing, as required by the statute of frauds, because the statute of limitations has passed or the property is destroyed.
Competent Parties
The parties have the legal capacity to contract, no mental defects, and are of legal age to contract.
Mutual assent
Mutual assent refers to the making and acceptance of an offer.
Meeting of the Minds
The contracting parties reach an agreement on all terms in a contract.
Consideration
Consideration is whatever is given in exchange for something else.
- Valuable Consideration
The money or a promise of something that can be measured in terms of money.
- Good consideration
A promise that cannot be measured in terms of money, such as love and affection.
Void and Voidable Contracts
A void contract does not meet all the required elements of a valid contract and, therefore, has no legal effect.
A voidable contract is a contract, but because of the manner or method in which it was brought about, one of the parties is permitted to avoid any contractual duties. A minor’s contract is voidable because the minor can choose to void the contract.
Statute of Frauds
A law that requires that certain contracts must be in writing and signed to be enforceable (contracts conveying an interest in real property).
Contracts covered by Florida’s statute of frauds
- Purchase and sale contracts
- Option contracts
- Deeds and mortgage instruments
- Lease agreements for a term longer than one year
- Listing agreements for a term longer than one year
Statute of Limitations
The statute of limitations designates the period of time during which the terms of a contract may be enforced. It protects people from being compelled to perform or otherwise be sued after a period of time has expired. The times vary, depending on whether it is an oral contract or a written contract:
- Written contracts—five years
- Oral contracts—four years
- Partly written and partly oral—five years for the written portion and four years for the oral portion
Transfer of Real Property
In addition to the four essential elements required in any contract, to be enforceable in court, real estate sale and purchase contracts must be in writing and signed by all parties who are bound by the agreement.
Real estate contracts are not required to be witnessed or notarized.
Elements of a Valid and Enforceable Real Estate Sale Contract
To remember the elements of a valid and enforceable real estate contract, remember COLIC:
Competent parties
Offer and acceptance (meeting of the minds)
Legal purpose
In writing and signed (statute of frauds)
Consideration (valuable or good)
Parol Contract
An informal oral agreement
Bilateral Contract
A bilateral contract obligates both parties to perform in accordance with the terms of the contract. A sale contract is an example of a bilateral contract because both the seller and the buyer are obligated to perform.
Unilateral Contract
A unilateral contract obligates only one party to an agreement. There is no obligation on the part of the other party involved.
An example of a unilateral contract is the ordinary option. If the person asking for an option (optionee) gives a consideration to the person granting the option (optionor), the optionor is obligated not to sell to anyone other than the optionee during the life of the option.
The optionee, however, is not obligated to buy. An optionee may choose to exercise the option. The optionor then is bound to honor the option on notification of the optionee’s intent to exercise it.
The option (unilateral contract) becomes a bilateral contract when the optionee has promised to exercise the option specified in the contract.
Express Contract
An express contract exists when all the terms and conditions have been spelled out and a meeting of the minds is reached in words of agreement and mutual understanding.
An express contract may be either written or parol; that is, it may be in writing or oral or be a combination of the two.
The primary requirements in an express contract are mutual understanding and agreement.
Implied Contract
An implied contract is one in which some or all of the obligations or conditions of a contract are not stated expressly (in words) but may be reasonably implied by the acts of the parties or by the nature of the transaction.
Every day, we enter into implied contracts. For example, if a person walks into a restaurant and orders dinner, an implied contract has been created.
It is implied that the customer will pay for the service after enjoying the meal without actually discussing the actual payment or agreeing to pay for the meal until after the service has been rendered.
In real estate dealings, if a For-Sale-by-Owner (FSBO) seller knowingly accepts the services of a real estate licensee and the licensee is the procuring cause of the sale, a real estate commission may be due.
Obviously, implied contracts are not a professional way of transacting real estate business.
Executory Contract
Assume a contract has been formed between parties, but something remains to be done by one or both parties to fulfill the conditions of the contract.
It is an executory contract because it is not yet a fully performed contract.
A real estate sale contract, between the time of signing the contract and the time of closing the transaction, is an executory contract.
Executed Contract
When all parties to a contract have completely performed all the obligations and promises contained in the contract, it is an executed contract.
For instance, a real estate sale contract becomes an executed contract after the title closing and all the promises of both buyer and seller have been fulfilled.
Termination of Offers
An offer is terminated when any of the following happens:
Counteroffer. A counteroffer indicates a willingness to contract but on terms or conditions different from those contained in the original offer. It is not an acceptance because it indicates an unwillingness to agree to the terms of the original offer. The original offer is dead forever and cannot be later accepted.
Acceptance. Communication of the acceptance of an offer creates a contract. An acceptance must comply strictly with the terms of the offer. Letters and telegraphic communication can be part of a valid sale contract. If Rebecca had accepted Ken’s offer of $34,000 for her property instead of making a counteroffer, the offer would have become a contract on that acceptance and its communication.
Rejection. To effectively terminate an offer, a rejection must be communicated by the offeree to the offeror. If Rebecca had chosen to reject Ken’s offer, the offer would have terminated when Rebecca communicated the rejection to Ken.
Withdrawal by offeror. An offeror may withdraw (or revoke) the offer at any time until notice of the offeree’s acceptance is received by the offeror or the offeror’s designated agent. Suppose, for example, that Rebecca decides to withdraw her counteroffer of $35,500. She may do so as long as her intention is communicated to Ken before he accepts her counteroffer.
Lapse of time. Ordinarily, when an offer is made, a time limit for acceptance of the offer is specified. The offer terminates after expiration of that time. If no time limit for acceptance is specified, the offeree is considered to have a reasonable length of time. This time period is based on such considerations as the method of communication used, the location of the parties involved, and the terminology and nature of the offer.
Death or insanity. The death or insanity of either the offeror or the offeree terminates the offer. An offer is not assignable (transferable); it may be accepted only by the person to whom it is made.
Destruction of the property. Destruction of the subject matter terminates the offer.
To remember the ways an offer may be terminated, remember WILD CARD:
- Withdrawal by offeror
- Insanity
- Lapse of time
- Death
- Counteroffer
- Acceptance
- Rejection
- Destruction of the property
Termination of Contracts
A contract is terminated when any of the following happens:
Performance. When both parties have fully performed the terms and conditions of a contract, the purpose of the contract has been accomplished and the contract is terminated. The emphasis is on full performance of each and every contract term or condition. This is, of course, the desired outcome of any contract. However, sometimes contracts are terminated for other reasons.
Mutual rescission. An agreement between the contracting parties to terminate their respective duties under the contract is called mutual rescission. Both parties must mutually agree to discontinue the contract.
Impossibility of performance. Performance may be impossible and beyond the control of the parties. For example, destruction of the physical improvements is a good excuse for impossibility of performance. The death of the buyer or the seller will usually be considered a reason for impossibility of performance, unless the real estate contract provides otherwise.
Lapse of time. Certain circumstances, such as lapse of time, will cause a contract to be terminated by operation of law. For example, a contract may be terminated as a result of the expiration of the statute of limitations. The words “time is of the essence” in a contract mean that dates and time limits in the contract must be met.
Bankruptcy. The bankruptcy of one of the parties will not in itself discharge the contract. If the bankrupted party is the seller, however, control of the asset will come under the control of the courts. A court-appointed trustee will be charged with liquidating the asset.
Breach. A contract is breached when one of the parties fails to perform and the law does not recognize the reason for failure to perform as valid. The aggrieved party may sue over a breach of contract.
Remedies for Breach of Contract
The Florida Real Estate Commission ordinarily has no authority or jurisdiction over breach of contract actions.
There are four legal remedies for breach of a contract:
Specific performance. If awards of money damages do not afford sufficient relief, the wronged party may sue for specific performance to have the courts force the other party to perform as the contract specifically states. This action is termed a relief in equity because such judgments are awarded in a court of equity.
Liquidated damages. Frequently the parties will stipulate an amount of money in the contract (usually the earnest money deposit) to be paid in the case of default by the buyer. This amount is called liquidated damages to the seller.
Rescission. To rescind is to cancel or annul the contract. The court orders the parties placed back to their original positions as though the contract had never existed. This relieves both parties from their respective obligations under the contract. An injured buyer is entitled to the return of any earnest money, and the seller is obligated to return any earnest money or payment received.
Compensatory damages. Another remedy for breach of contract is a suit for damages. Usually the party bringing suit seeks an amount of money equal to the extent of loss suffered (compensatory damages). A wronged party may find that a certain property was misrepresented but decide to accept the property and, in addition, sue for damages. On the other hand, the buyer may decide to refuse the property and still sue for damages.
Liquidated Damages
The amount specified in the contract (usually the earnest money deposit) to be paid to the seller in case of default by the buyer.
Assignment
Assignment refers to a transfer of rights and duties under a contract. Except where the terms and conditions of the contract provide otherwise, or where specifically prohibited by law, a contract is assignable (transferable).
Novation
The parties to a contract may agree to substitute another person’s obligation to perform.
Novation is the substitution of a new party for the original one. The effect is to discharge the original party from the obligation.
4 Contracts Important to Real Estate
(1) listing contracts
(2) buyer brokerage agreements
(3) option contracts
(4) sale and purchase contracts.
Listing Contracts
In Florida, a listing contract may be written, oral, or implied.
Written listing contracts must include the following:
A definite expiration date Identification of the property Price and terms Fee or commission Signature(s) of the owner(s)
Florida law requires that a copy of the contract must be given to the owner(s) within 24 hours of execution.
Furthermore, Chapter 475, F.S. forbids including an automatic renewal clause in a listing. Any extension of the listing agreement must be negotiated.
Even though Florida law recognizes oral listing contracts, all listings should be in writing because the listing contract is a broker’s employment contract.
If litigation should result from some misunderstanding, default, or breach, it is easier to find a remedy by showing the written terms and conditions rather than trying to prove the terms or conditions of an oral listing.
However, listing contracts are not covered by the statute of frauds (unless they are for more than one year). Therefore, oral listing contracts are enforceable with the proper amount of evidence and testimony.
Power to Bind the Seller or the Buyer
A broker does not have the authority or power to sign a contract for the buyer or the seller or to bind the buyer or the seller to a contract unless the power to do so is specifically granted.
Power of attorney is a written legal document designating some other person as an attorney-in-fact. The attorney-in-fact then may bargain and sign for the person who granted the power of attorney, provided that power is specific.
A real estate licensee occasionally may come in contact with either a general power of attorney or a special power of attorney. The general power of attorney authorizes the attorney-in-fact to act generally for the principal in all matters.
The special power of attorney limits the attorney-in-fact to one specified area of activity or one special act, such as signing a contract for sale or purchasing a designated property.
When power of attorney is granted for acts related to title to real property, the instrument must be witnessed, acknowledged, and recorded in the public records.
Usually with listing agreements, you can assume that the seller has not given power of attorney to the broker. The signatures of both parties (seller and agent) on the listing contract may create some special situations.
Conditions Created by Listing Contract
Exclusive-right-of-sale listings and exclusive-agency listings are usually bilateral contracts because both parties are obligated to perform. Open listing agreements are usually unilateral contracts because the only promise made is that the seller promises to pay a commission if the broker causes a transaction to be consummated.
The licensee is to find a purchaser or effect a sale.
If required to find a purchaser, the licensee must:
(1) produce a buyer who is ready, willing, and able to buy at the terms specified by the seller or….
(2) take to the seller a buyer’s offer that subsequently becomes a contract.
A licensee who has performed either of the above actions is entitled to a commission, even if the buyer and seller finally negotiate a sale on different terms.
If required to effect a sale, the licensee must not only find a buyer ready, willing, and able to buy on the terms specified or other terms accepted by the seller, but the licensee must also ensure that the transaction actually closes.
Types of Listings
- Open Listing
A seller gives an open listing to any number of brokers who can work simultaneously to sell the owner’s property. The seller reserves the right to sell the property and to list it with other brokers. The first broker to secure a buyer who is ready, willing, and able to purchase at the terms of the listing is the procuring cause and earns the commission.
If the owner sells the property, no broker is entitled to a commission. In the event of a sale, the seller is not obligated to notify any of the brokers that the property has been sold. Open listings benefit only the seller. Therefore, few brokers accept them (also see “Broker’s Compensation” in this unit).
- Exclusive-Agency Listing
A seller gives an exclusive-agency listing to one broker who handles the transaction. The seller reserves the right to sell the property without paying a commission, unless the buyer was introduced to the property by the broker or others acting under the broker.
If the broker or another person acting under the broker’s authority sells the property before the seller is able to do so, the broker is entitled to a commission.
- Exclusive-Right-of-Sale Listing
The exclusive-right-of-sale (or exclusive-right-to-sell) listing is the most advantageous listing from the broker’s viewpoint.
The seller gives the listing to a selected broker, who then becomes the exclusive real estate agent of the owner for the sale of the property during the time the listing contract is in effect.
The broker therefore is assured of a commission regardless of who sells the property. Even if the owner sells the property during the contract period, the broker is entitled to a commission.
- Net Listing
An open, exclusive-right-of-sale or exclusive-agency listing can also be a net listing. A net listing is created when a seller agrees to sell a property for a stated acceptable minimum amount, called the seller’s net. The broker retains the proceeds in excess of the seller’s net as commission.
The seller’s net plus the broker’s commission and closing costs equal the total sale price. Net listings are legal in Florida, however, the broker may not misrepresent the value of the property to gain a financial advantage. The broker and the seller jointly arrive at a listing price. The broker then retains, as commission, all proceeds of the sale after the costs of sale are paid and the seller receives the agreed-on net amount.
For example, assume the property owner indicates to the sales associate that the owner wants to net $142,000 from the sale of the property. The sales associate must assist the property owner with a listing price that will cover the owner’s estimated closing costs and provide the brokerage with a commission.
The sales associate estimates that the seller’s closing costs will be approximately $3,700.
$142,000 required net to seller + $3,700 closing costs = $145,700 total needed by seller
The broker’s commission for this type of transaction is 6%.
100% – 6% commission rate = 94% remaining for seller
$145,700 ÷ .94 (94%) = $155,000 listing price
The property must sell for $155,000 to cover estimated closing costs of $3,700, to provide a commission of 6%, and for the seller to net $142,000.
- Multiple Listing
A multiple listing refers to a service provided by brokers and not to a specific type of listing. It is created by a clause included in exclusive-right-of-sale and exclusive-agency listing agreements that allows the broker to convey listing information to a multiple listing service (MLS).
An MLS serves as a clearinghouse for listings obtained by REALTOR® member brokers and then shared with other MLS member brokers through a published list of properties for sale.
Any members of MLSs, regardless of the brokerage company they work for, can show their buyers the listings of other MLS members and receive compensation (part of the commission) if the buyer purchases the property.
procuring cause
To be a procuring cause, the broker must have started the chain of events that resulted in a sale. The facts dictate who is the procuring cause.
The person whose efforts cause the parties to enter into a contract is generally considered to be the procuring cause. The broker who has a current listing agreement with the seller is not necessarily the procuring cause. That broker may be entitled to a fee when another broker sells the property, but procuring cause goes to the broker who brings the buyer.
Procuring cause disputes between licensees are usually settled through an arbitration hearing. Disputes between a broker and a buyer or a seller may be litigated in court.
Buyer Brokerage Agreement
A buyer brokerage agreement is an employment contract with the buyer.
The broker is presumed to be employed as the buyer’s transaction broker.
If the broker is to be employed as the buyer’s single agent or have no brokerage relationship with the buyer, the broker must provide the required written disclosure.
Buyer broker agreements typically include the following:
The parties to and term of the agreement (beginning and ending dates)
General characteristics of the property being sought by the buyer, including type of property, price range, and location
Broker’s obligations
Buyer’s obligations
Retainer and compensation (either as a dollar amount or a percentage of purchase price)
Protection period
Early termination of the agreement and dispute resolution (buyer and broker agree to mediate first)
Authorized brokerage relationship
Option Contract
An option contract is an agreement to keep open for a specified period of time an offer to sell or lease real property.
The property owner (optionor) grants a prospective buyer (optionee) the exclusive right to buy the property within a specified period for a specified price and terms.
Option contracts must be in writing and signed because they fall under the statute of frauds.
The optionee can easily turn option contracts into sale contracts by notifying the optionor in writing that the option is being exercised.
Unilateral Contract
One major difference exists between an option and a sale contract.
In an option contract, the owner (optionor) is bound to perform the terms of the option if required to do so by the optionee.
The optionee, however, may elect to walk away from the transaction because the option contract grants the optionee a right, not an obligation to buy the property. This makes the option a unilateral contract.
In the normal bilateral sale contract, if either party does not perform all the terms, the other party may sue for breach of contract.
Consideration is due to the optionor if the optionee breaches the bilateral/sale contract.
Options must contain all the terms and provisions required for a valid contract.
The option must clearly specify the length of time the option is effective, the names of the contracting parties, the price of the property, a complete legal description, and the terms of the fee paid.
Unless prohibited in the terms of the agreement, an option contract is assignable (transferable).
Sale and Purchase Contracts
The parties to a sale and purchase contract (sale contract) are the vendor (or seller) and the vendee (or buyer).
Unlike the option contract, a real estate sale contract (also a purchase agreement or contract for sale and purchase) is a bilateral contract because it contains promises to perform by both parties.
Information Contained in Sale Contracts
Sale contracts must be in writing and signed and contain all the terms and provisions required for a valid contract.
Although the Florida statute of frauds requires that sale contracts be in writing, courts have required that oral sale contracts be honored in some instances (see “Statute of Frauds” in this unit).
Also, letters and telegraphic communications can be part of a valid sale contract. Information spelled out in the contract includes the following:
- Names of the vendor and vendee (or their legal representatives)
- Legal description (preferred) or street address of the property
- Consideration
- Purchase price
- Financing or cash terms
- Type of deed the seller will deliver (general warranty deed, unless agreed otherwise)
- Title evidence required and type of estate (fee simple estate, unless agreed otherwise)
- Terms of expenses and any prorations to be paid
- Personal property to be left with the real property
- Date, time, and place of closing
- When possession of the property will occur
The consideration in a sale contract is the promises that the buyer and the seller make to each other. However, it is also a good idea to include a provision for an earnest money (binder) deposit and when it is to be paid. Earnest money is not required to make the contract valid. However, it shows the buyer’s intent to go through with the transaction. The contract usually states that the seller may retain the earnest money deposit as liquidated damages if the buyer breaches the contract.
Unless otherwise stated in the contract, the seller must convey a clear and merchantable title. Licensees may be guilty of fraud and subject to disciplinary action if they are aware of any title problem and do not inform the buyer before a contract is entered into or any part of the purchase price is paid.
Most sale contracts require that the seller provide the buyer with an up-to-date abstract or a title insurance policy. If no such requirement is included in the sale contract, then the seller need not deliver either.
When the property is co-owned by a married couple, or if it is the homestead and ownership is in only one spouse’s name (in severalty), both spouses must sign the real estate sale contract.
If the seller’s spouse signs the sale contract, that spouse indicates a willingness to convey ownership rights and to relinquish homestead interest when the time comes to sign the deed that transfers title.
If the buyer’s spouse signs the sale contract, that spouse also becomes bound to purchase the property. Then, in the event of failure to perform, either party can be sued. If only one spouse signs a contract to purchase, only that spouse is accountable.
Disclosures
- Material Defects Disclosure
Sellers of residential real property must disclose material defects concerning the property. The use of an “as is” provision in a contract for the sale of real property does not circumvent the duty to disclose all known material defects.
- Radon Gas Disclosure
A radon disclosure statement on real estate sale and lease contracts is required on at least one document before or at the time of executing a sale contract or a rental agreement.
At present, the disclosure consists only of what radon is; it does not require testing to disclose radon gas levels before a sale or lease.
- Lead-Based Paint
When purchasing or renting pre-1978 housing, the Residential Lead-based Paint Hazard Reduction Act requires that:
a. Sellers and landlords must disclose to prospective buyers and tenants the presence of known lead-based paint in residential property built prior to 1978;
b. Sale contracts must include a disclosure about lead-based paint;
c. An EPA pamphlet regarding the danger of lead-based paint must be given to buyers and tenants prior to the sale or lease of residential property built before 1978; and
d. Sellers must allow homebuyers a 10-day period during which to conduct an inspection for the presence of lead-based paint (sellers are not required to pay the cost of the inspection).
Renovations and demolitions of properties built before 1978 can create harmful lead dust and chips. Because of this hazard and to prevent possible lead contamination, the Environmental Protection Agency (EPA) issued a rule that became effective in April 2010. The rule requires contractors who disturb paint in these properties to be certified and follow specific work practices. To become certified, a renovator must successfully complete an eight-hour training course offered by an accredited training provider.
When a real estate licensee lists pre-1978 property for sale, it becomes the responsibility of the licensee to make certain sellers comply with the law. The federal law does not require the testing or removal of lead-based paint. The focus of the law is disclosure of lead-based paint dangers and its presence.
- Energy Efficiency Brochure
The Florida Building Energy-Efficiency Rating Act requires that buyers, before signing a sale contract, receive an information brochure notifying the purchaser of the option for an energy-efficiency rating on the building.
The brochure contains a notice to residential purchasers that the energy-efficiency rating may qualify the purchaser for an energy-efficient mortgage from a lending institution. The act also created a uniform, statewide energy-efficiency rating system for rating new and existing residential, commercial, and public buildings.
- Homeowners Association Disclosure
Florida Statute 720 requires sellers of property subject to a mandatory homeowners association to provide buyers with a disclosure summary regarding the association, the existence of restrictive covenants, and any assessments that the association imposes.
The disclosure summary must be supplied by the developer or by the current owner.
In addition to providing the Homeowners Association Disclosure Summary, the contract for sale and purchase must state that:
- The buyer should not sign (execute) the contract without first receiving and reading the homeowners’ disclosure summary;
- If the disclosure summary is not provided to the buyer before executing the contract for sale and purchase, the contract is voidable;
- To void the contract, the buyer must give the seller or the seller’s agent written notice of the buyer’s intention to cancel the contract within three calendar days after receipt of the disclosure summary or prior to closing, whichever occurs first; and
- The right to void the contract cannot be waived by the buyer. (The right terminates at closing.)
- Property Tax Disclosure
Prospective buyers of residential property must be presented a disclosure summary concerning ad valorem taxes before or at the time of execution of the contract for sale.
The purpose of the disclosure summary is to caution prospective buyers that they cannot rely on the amount of the seller’s property taxes as an indication of the taxes purchasers will be required to pay in the year following purchase of the property.
- Building Code Violation Disclosure
A seller who has been cited for a building code violation and is the subject of a pending enforcement proceeding must disclose in writing to the buyer the following information before title closing:
a. The existence and nature of the violation and proceedings
b. A copy of the pleadings, notice, and other applicable documents received by the seller
c. Notice that the buyer will be responsible for compliance with the applicable code and with the orders issued in the county court proceeding
The statute does not address the liability of the seller regarding the costs associated with the code violation.
Liability costs should be addressed and negotiated in the contract for sale and purchase. The seller must forward to the code enforcement agency the name and address of the new owner and a copy of the disclosures given to the buyer within five days after the title transfer.
A seller who violates this provision creates a rebuttable (i.e., disputable with evidence) presumption of fraud and may become the subject of a civil case.
- Community Development District
A community development district (CDD) is an independent special district created pursuant to Florida law, to service the long-term specific needs of its community. A CDD constructs, operates, and maintains community-wide infrastructure and services for the benefit of its residents.
CDDs provide an alternative way to fund and construct capital infrastructure to service projected growth without overburdening other governments and their taxpayers. The developer finances the construction of infrastructure by issuing bonds.
Tax assessments are imposed on the homeowners to repay the bonds. The CDD tax assessments are in addition to county and city property taxes.
Initial contracts for sale of a parcel of real property and initial contracts for residential units within the CDD are required by law to include a disclosure to purchasers.
The disclosure statement must appear immediately prior to the space reserved for the purchaser’s signature and be written in boldfaced, conspicuous type that is larger than the type used in the rest of the contract
