Disclosure Lawsuit Continues

Read the full decision: Stauff v. Bartnick

Oklahoma court reinstates lawsuit alleging transaction broker failed to disclose adverse material facts that the brokerage had received during an earlier transaction involving the property.

Jason Stauff (“Buyer”) was moving from Texas to Oklahoma, and so he retained a real estate brokerage firm (“Broker”) serving as a transaction broker to help him locate a home.  The Buyer found a home that he liked, and he received the property condition disclosures from the sellers (“Sellers”) after making his offer for the property. 

Following his purchase, the Buyer alleged that he discovered numerous defects on the property and claimed that these defects were not properly disclosed to him by both the Sellers and the Broker.  In particular, the Buyer claimed that the Broker and Seller were aware of the defects on the property because the Broker had represented one of the Sellers when she purchased the property in 2010.  In 2010, the prior owner had disclosed that the property had been damaged by water and there was occasional flooding in the basement as well as termite problems.  The 2010 termite inspection and other repairs were both ordered by the Broker’s salesperson. 

The Broker argued that a different salesperson had represented the Sellers in the prior transaction and the firm had a confidentiality policy which prohibited the Buyer’s salesperson from accessing the 2010 transaction file.  Because the salesperson did not have access to the earlier records, she did not have any knowledge of the prior defects and only knew that a 2013 termite inspection had found evidence of a prior infestation but that it was resolved.  The trial court entered summary judgment in favor of the Sellers and dismissed the lawsuit against the Broker. The Buyer appealed.

The Court of Appeals of Oklahoma, Civil Division, reversed the trial court and sent the case back to the lower court for further proceedings.  A real estate licensee serving as a transaction broker has two duties under the state’s property condition disclosure law: to make available to the purchaser the seller’s disclosure statement and to disclose any defects known to the licensee that are not contained in the disclosure statement.  The Buyer argued that the Broker had violated the disclosure law because the Broker had received information about the property’s defects during the 2010 transaction.

The court determined that the Buyer had made sufficient allegations for his lawsuit to continue.  The Broker admitted that it had received the information about the property during the 2010 transaction, but that the Broker’s confidentiality policy prohibited the sharing of the transaction documents with the licensee who represented the Buyer.  The court ruled that the Broker’s confidentiality policy was contrary to the purpose of the property disclosure law and that the Buyer had sufficiently alleged a cause of action against the Broker for its failure to disclose the information from the earlier transaction.  Therefore, the court reversed the trial court and the case was sent back to the lower court for further proceedings.

Stauff v. Bartnick, 387 P.3d 356 (Okla. Civ. App. 2016).