It’s January and many horse people have arrived in or are soon on their way to sunny Florida and various winter show circuits. During this seasonal equine extravaganza, hundreds, if not thousands of horses will change hands.
Whether you regularly migrate to Florida this time of year or whether this is your first trip, I’ll bet that most horse professionals and their clients are unaware of the strict rules that govern horse sale activities within the state. These rules are found in the Florida Administrative Code (FAC). Under Florida law, a violation of these rules can be deemed a deceptive practice!
Florida has not only created rules governing disclosure of agency and dual agency relationships, but also regulating commission payments made in connection with horse sales. Equally important to know and understand is the requirement of a written bill of sale. The FAC outlines the minimum requirements for mandatory bills of sale.
The big message here is two-fold, 1) you MUST have a written bill of sale, and 2) your bill of sale MUST comply with FAC Rule 5H-26.004.
Here’s the list of things that under FAC Rule 5H-26.004 must be in a bill of sale:
“(1) The name, address, and signature of the Purchaser, the Owner, or their duly authorized agents. In a transaction solely relating to a stallion season, breeding right, or fractional interest in a horse, the syndicate manager or horse manager may serve as an acceptable agent in response to this requirement.
(2) The name of the horse, and its sire and dam if known.
(3) The breed and registry status of the horse, if applicable and if known.
(4) The age of the horse, if known.
(5) The date of the sale.
(6) The purchase price of the horse.
(7) The following statement: “As the person signing below on behalf of the Owner, I hereby confirm that I am the lawful Owner of this horse or the Owner’s duly authorized agent, and I am authorized to convey legal title to the horse pursuant to this bill of sale.”
(8) The following statement: “As the person signing below on behalf of the Purchaser, I understand that any warranties or representations from the Owner or the Owner’s agent that I am relying upon in acquiring this horse, including warranties or representations with respect to the horse’s age, medical condition, prior medical treatments, and the existence of any liens or encumbrances, should be stated in writing as part of this bill of sale.”
The rule places a burden on the owner and the owner’s agent/trainer to disclose drugs or treatments given to a horse prior to sale. As an example, an owner/trainer/agent must disclose extra-corporal shockwave therapy or radio pulse-wave therapy if done within seven (7) days of a private sale. The disclosure requirements call into question whether it is best to disclose these matters in writing, perhaps within the bill of sale itself.
The law also requires that when an owner or agent provides any medical information in response to an inquiry from a purchaser or the purchaser’s agent about the medical history of a horse, the owner or its agent shall accurately disclose all information within its knowledge that is responsive to the inquiry. This is an area that can get very muddied in litigation with “he said/she said” scenarios, or when the horse has been newly imported and its foreign medical history is not known. Does the seller have any due diligence obligations to run down the history on a sale horse? Or can he or she get by with a response like “unknown, newly imported?” The multitude of problems that could arise from this one rule gives this lawyer nightmares.
Horse professionals and owners selling any horse in Florida need to adhere strictly to these rules – remember, a violation of any provision which results in damage is deemed an unfair and deceptive trade practice, potentially exposing you to awards of punitive damages and attorney fees in addition to actual damages if you are sued!
In addition to these disclosures and bill of sale requirements, Florida imposes some very tough standards on agent compensation, disclosure, and conduct. Under Florida law, “dual agent” means a person who knowingly agrees with the buyer and seller of a horse, either individually or jointly, to act in a fiduciary capacity on behalf of both in exchange for compensation. As a practical matter, acting as a fiduciary is the same as acting as an agent. Frequently in horse sales, it means handling purchase money or sales proceeds, making determinations of soundness or suitability, negotiating sale terms, etc. If you act as a dual agent in a horse sale, you must inform and obtain the written consent of both the buyer and seller. If you are a trainer and have a client with a horse for sale and you think it would be a suitable horse for another client, you should have the written consent of each of these people if you are going to have any involvement in the sale. This written consent is required regardless of whether you take a commission!
Regarding commissions, the FAC states:
“No person acting as an agent for a Purchaser or an Owner, or acting as a dual agent, in a transaction involving the sale or purchase of a horse or any interest therein, may receive consideration, compensation, fees, a gratuity, or any other item of value in excess of five hundred dollars ($500), related directly or indirectly to such transaction, from an individual or entity, including any consignor involved in the transaction, other than the agent’s principal, unless:
(a) The agent receiving, and the person or entity making, the payment disclose in writing the payment to both the Purchaser and Owner; and
(b) Each principal for whom the agent is acting consents in writing to the payment.”
Interestingly, Florida law expressly provides that when you act as a dual agent or are being paid by someone other than the person for whom you are acting as an agent, called your “principal,” then upon a request by your principal you must furnish copies of all financial records and financial documents in your possession or control pertaining to the transaction. At the very least, this would mean copies of checks or wiring information, and arguably your bank statement for the time period relevant to the transaction. The financial information does not include financial records that are the agent’s or owner’s work product used to internally evaluate the horse. If you are representing a buyer, but being paid a commission by the seller or seller’s trainer/agent, your client/principal can ask for your financial records pertaining to the transaction – in essence, confirm what you were paid and by whom.
Another important rule to know is that an agent/trainer is prohibited from purchasing on behalf of a principal, or recommending that its principal purchase any horse in which the agent/trainer has a legal or equitable ownership interest. If you intend to sell a horse to a client that you have a financial interest in, you must inform your principal and obtain the principal’s written consent, if practicable. It stands to reasons if you are importing horses to sell to clients in Florida and maintain any financial/profit interest in that horse, you need to inform your client and obtain written consent. This is something that could easily be included in the bill of sale. Finally, if you have brokered a sale transaction between two clients (dual agency) and have not been paid your commission or fee as agreed, you cannot enforce the agreement unless it is in writing.
Well you might ask, why does Florida law apply to me? I’m from New York, my horses are coming from other states or countries, I’m selling to people who are not Florida residents – why do I need to comply? While the scope of this article will not broach the broad topic of venue and jurisdiction, suffice it to say the FAC is very clear – it applies to horse sales in Florida and does not differentiate on any residency basis. Also, if you are conducting business in Florida by way of horse sales, you should check to see if you need to register to do business in the state to ensure you are complying with all laws applicable to your business, however seasonal.
Hopefully, you do not view the FAC rules in a way that will damper your enthusiasm, but instead will help you – whether a buyer or seller – in protecting yourself against expensive litigation and making sure your beloved four legged friends don’t become the subject of a nasty dispute.