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Real Estate Brokers Now Have Greater Duty to Warn of Risks

Often, clients ask us whether or not their real estate broker, or the other party's broker, should have warned them of a particular hazard prior to their having completed the purchase of a home. Sometimes, our response is that in that particular situation, the broker/agent did not have the duty to warn the buyer. Other times, even when there is language in the purchase and sale agreement purporting to relieve the broker of responsibility on a certain issue, we conclude that the waiver is not enforceable, or does not relieve the one or more of the brokers in the transaction of potential liability.

 

A recent state Court of Appeal case has made it more clear than ever that brokers have a lot of work to do before they fairly earn their commission. This includes the listing broker in cases where the buyer claims damages because of the failure of the listing broker to perform competently.

 

(In one of our recent cases, we sued a real estate broker because our client purchased a home where a portion of the swimming pool actually wound up being located on the neighbor's property. When the broker asserted that he was relieved of duty for that outrage by virtue of a provision in the contract warning the buyer not to rely on the broker in connection with boundary issues, the Judge yelled out to the broker's counsel, "Then, just what does a broker do to earn his commission!") (We settled that case for well into the six figures even though we also were able to obtain the neighbors' consent to modify the boundaries so that the swimming pool was brought within our client's property).

 

In the brand new case of Hall v. Aurora Loan Services, LLC, 2013 DJDAR 5460 (April 16, 2013), the court ruled that a jury can potentially hold the broker liable for negligence where the broker did not warn others about conditions which were clearly set forth in the inspection report which is produced prior to the close of most escrows even if the broker has no special knowledge regarding this particular situation.

 

For example, let us say that the inspection report says that a deck which was built 30 years ago can no longer be considered to be safe. It is NOT enough for the broker simply to forward the inspector's report to the buyer or buyer's agent with instructions to read the report. Instead, the listing broker has a special duty to make known to the people who visit the property and the buyer's agent the contents of the report. In short, it is possible in a situation as set forth herein, that the listing broker will have a responsibility to warn all visitors and the buyer specifically that the deck may not be safe.

 

If, in the case of the deck, the listing broker did not issue warnings about the deck, and someone was injured or killed when the deck collapsed, the listing broker could be liable for all damages which ensue. The buyer's agent may also have responsibility for such an incident.

 

In short, if you believe that you are the victim of broker/agent negligence (or worse), due not assume that the agent is correct when he/she contends that there is no liability because the written contract says so. The law, including very recent law, may say otherwise.

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