Legal Update: The Lafont Case
The Fourth District Court of Appeal of Florida recently rendered a decision, Florida Inv. Group 100, LLC v. Lafont, Case No. 4D18-2075 44 Fla. L. Weekly D 1063 (Fla. 4th DCA April 24, 2019), affecting the interpretation of the “Loan Approval Period” of the 2017 “As-Is” Residential Contract for the Sale and Purchase.
In Lafont, Florida Investment Group 100, LLC (“FIG”), the Seller, appealed a final summary judgment entered in favor of the Buyer, Annalisa Lafont (“Lafont”). The issue on appeal was whether the Buyer, who never notified the Seller that they obtained loan approval, was able to cancel the contract and receive their deposit when the property did not appraise. The 4th DCA held that an insufficient appraisal of the property did not excuse the buyer from closing, where the buyer never obtained Loan Approval as defined in the Contract. The real issue was that the buyer did not obtain Loan Approval for the terms that were in the Contract. Instead, the appraisal was for a mortgage that had different terms than those as required by the Contract. The Contract provides that if the Buyer doesn’t notify the Seller that Loan Approval has been obtained or if Loan Approval has not been obtained and the Buyer has not canceled, then Loan Approval is “deemed waived”. However, without a loan having been obtained, there are no terms to be considered for Loan Approval. The Court held that the failure to obtain Loan Approval as defined in the Contract does not then allow the Buyer to cancel the contract and receive their deposit if the property does not appraise for terms that are different than those listed in the Contract.
What if the Buyer obtained Loan Approval pursuant terms in the Contract, but simply failed to tell Seller? I think in that instance, the Court would have held that the Buyer has the ability to receive the deposit because the property didn’t appraise based on the terms agreed upon in the Contract, and the failure to inform Seller deemed Loan Approval on those terms were obtained. If the property didn’t appraise based on those terms, then the Buyer can back out. The biggest issue in Lafont was that the terms changed.
What’s the takeaway? Make sure the loan terms included in the Contract are the actual terms the Buyer is attempting to obtain. Any difference would depart from the agreement and the Buyer cannot avail himself to the terms of the Contract.