Agency Highlights: 1Q 2017

Three agency cases from this quarter address several different issues. In the first case, the court considered whether a broker who represented the buyer of the property had also entered into an agency relationship with the seller of a property. In the second case, the court determined that the licensee could be held liable for his refusal to submit a rental listing for a property in direct violation of the client’s request. This case also affirmed that Michigan does not recognize a cause of action for professional malpractice against real estate professionals. The third case examined whether a licensee in the same firm as the dual agent can be held liable for an alleged breach of the dual agency agreement even though that licensee was not named in the agreement.

A. Cases

1. Leonardo Harper LLC v. Landmark Commercial Real Estate Services, Inc., No. 329338, 2017 WL 1103534 (Mich. Ct. App. March 21, 2017)

Broker was not liable to the seller because broker did not enter an agency relationship with the seller.

A broker representing a national retail chain entered into an agreement with a landowner indicating that the broker had procured the retailer as a prospective tenant for the land. The broker also provided the landowner with a copy of the store’s typical layout plans. After the landowner’s architect concluded that the store could not fit on the land, the broker introduced the landowner to an interested buyer, who ultimately purchased the property.

The landowner claimed that the broker made misrepresentations about the retailer’s leasing requirements in order to induce the landowner to sell to the buyer, so that the buyer could benefit from a lease of the property to the retailer. The landowner brought an action against the broker for fraud, breach of fiduciary duty, tortious interference, and civil conspiracy. The broker moved to dismiss the case arguing that he never entered into an agency relationship with the landowner. The trial court granted the motion, finding there was no evidence that the broker held himself out as the landowner’s representative.

The appellate court found that the broker acted on behalf of the buyer, and his actions were consistent with his role as a buyer’s representative. The commission and purchase agreements stated that the broker and his employer represented the retail store and buyer. There was no evidence that the landowner had control over the broker, that the broker had authority to bind the landowner, or was otherwise acting as the landowner’s representative. Judgment for the broker was affirmed.

2. Schwartz v. Real Estate One, Inc., No. 328727, 2017 WL 378749 (Mich. Ct. App. Jan. 26, 2017)

Listing broker could be liable for failing to submit a rental listing for the seller’s home, and for failing to inform the seller that the listing had not been made.

A home seller entered into an exclusive listing agreement with the defendant broker. After the home was listed for sale, the seller instructed the broker to post a rental listing for the property in order to receive accelerated rent from the existing, vacating tenants. However, the broker failed to submit a rental listing and failed to tell the seller that he did not do so. The seller brought claims against the broker for breach of fiduciary duty, breach of contract, fraud, violation of the Consumer Protection Act, and negligence. The trial court granted summary judgment in favor of the broker.

On appeal, the appellate court reversed summary judgment on all of the claims except for professional malpractice. The appellate court noted that because the broker was in a fiduciary relationship with the seller, the broker owed duties of disclosure, care, loyalty, and fidelity to the seller. The seller sufficiently alleged claims for negligence and breach of fiduciary duty based on the representative’s failure to list the property and the failure to disclose that the representative refused to submit the rental listing. Furthermore, the listing agreement provided for the sale and lease of the property. Therefore, the seller properly stated a claim for breach of contract based on the representative’s failure to create the rental listing.

Licensee who worked closely with dual agent, but who was not a party to a dual agency agreement, was not liable to purchaser.

There was also some evidence that the defendants may have made a misrepresentation regarding the fair market rental value of the home, allowing the fraud claim to proceed. With respect to the professional malpractice claim, the appellate court affirmed summary judgment for the broker because malpractice claims against real estate brokers and licensees are not recognized in Michigan.

3. Szynkowicz v. Bonauito-O’Hara, 170 Conn. App. 213 (Jan. 10, 2017)

The purchaser and seller of a property entered into a dual agency agreement with Hanley, who was a colleague of the defendant licensee. The purchaser and seller entered into a contract for development of the property, which was later cancelled due to the seller’s inability to complete construction. The purchaser brought claims for breach of the implied covenant of good faith and fair dealing, fraudulent representations, violation of oral agreement, and violation of the Connecticut Unfair Trade Practices Act against the defendant. The purchaser alleges that the defendant licensee knew or should have known that the seller was having financial difficulties, should have disclosed that information to the purchaser. The trial court granted summary judgment for the defendant licensee.

The appellate court agreed with the trial court’s conclusion that there was no contractual relationship between the purchaser and licensee to support liability on the contract-based claims. The agreement named only Hanley as the dual agent; the defendant licensee was not named in the agreement and the defendant did not sign the agreement. Even if the purchaser believed that the defendant licensee represented him, the dual agency agreement did not bind, or even mention, the defendant. The remaining claims were barred by the statute of limitations. The appellate court affirmed summary judgment for the defendant licensee.

B. Statutes and Regulations

Idaho

Idaho added the words “clearly and conspicuously” to its statute regarding licensee advertising. Effective July 1, 2017, all advertising of listed property and all advertising by licensed branch offices must clearly and conspicuously contain the broker’s licensed business name.1

Montana

Under a statutory amendment, it is considered unprofessional conduct for a salesperson to represent or attempt to represent a real estate broker other than the salesperson’s supervising broker without the knowledge or consent of the employer.2 Also, neither a broker nor a salesperson may negotiate a transaction directly with a seller or buyer if they know the seller or buyer has a written listing agreement or buyer broker agreement granting exclusive agency to another broker.3 Under another amendment, the supervising broker’s name and address must be indicated on the salesperson’s license; the statute previously required only the supervising broker’s address.4

Utah

Utah amended the statute regarding broker designations. The statute defines a “branch broker” as an associate broker who manages a principal broker’s branch office under the supervision of the principal broker.5 A “dual broker” is defined as a principal broker of a real estate sales brokerage who obtains a dual broker license to function as principal broker of a property management company that is separate from the real estate brokerage.6 A principal broker may simultaneously supervise one main office and up to two branch offices, and a branch broker may simultaneously supervise up to three branch offices.7 A sales representative affiliated with a dual broker may act as a property management sales representative if the dual broker designates the sales representative as a property management sales representative.8 A property management sales representative may simultaneously provide both property management services and real estate sales services under the supervision of a dual broker.9

The Utah Division of Real Estate issued modified regulations regarding real estate advertising. The regulations amend the definition of advertising to mean a “commercial message” (instead of a solicitation) communicated through various forms of media, including electronic communication.10 The modified regulations maintain the requirement that advertising clearly and conspicuously identify the brokerage firm, but eliminate the previous font size requirements.11 If it is not reasonable for a licensee to identify the name of the brokerage firm in an electronic advertisement, the licensee must ensure the electronic advertisement directly links to a display that clearly and conspicuously identifies the broker.12 The licensee need not identify the broker if the licensee advertises a property that is not currently listed with the brokerage with which the licensee is affiliated.13 The amended regulations also remove the special team advertising rules and state that teams are subject to the same advertising restrictions as individual licensees.14

Wyoming

Wyoming amended its statute to require licensees, beginning July 1, 2017, to provide the real estate company name under which they are licensed when “promoting” themselves “as a licensee.”15 All promotional materials must include the real estate company name.16 Another statutory amendment, also effective July 1, 2017, requires licensees to provide all customers with an agency disclosure.17 If a buyer or seller refuses to sign the relationship disclosure presented by the licensee, the licensee may document the refusal with an acknowledgement signed by the licensee.18 The licensee may continue with the transaction and the disclosure and the acknowledgement must be attached to any written agreements with the buyer or seller.19

Other statutory changes address broker and licensee responsibilities in real estate transactions. An associate broker or salesperson may not engage in a real estate activity representing a real estate company other than the company under which the salesperson is licensed.20 Responsible brokers must disclose, in every real estate transaction, the names of all real estate companies for which the broker holds a license.21 If the responsible broker is representing a buyer or seller in a transaction involving two or more companies the responsible broker manages, the broker must appoint a transaction manager for each real estate company, unless the other licensee is an associate broker.22

C. Volume of Materials Retrieved

Agency issues were identified 8 times in 7 cases (see Tables 1, 2). Breach of Fiduciary Duty was the most commonly raised issue, while Dual Agency and Buyer Representation issues were also addressed in cases this quarter. Eleven Agency statutes and two regulations were retrieved this quarter (see Table 1).

[1] Idaho Code § 54-2053 (2017) (effective July 1, 2017).
[2] Mont. Code Ann. § 37-51-321 (2017).
[3] Id.
[4] Mont. Code Ann. § 37-51-308 (2017).
[5] Utah Code Ann. § 61-2f-102 (2017).
[6] Id.
[7] Utah Code Ann. § 61-2f-206 (2017).
[8] Id.
[9] Id.
[10] Utah Admin. Code R. 162-2f-102 (2017).
[11] Utah Admin. Code R. 162-2f-401h (2017).
[12] Id.
[13] Id.
[14] Id.
[15] Wyo. Stat. Ann. § 33-28-119 (2017).
[16] Id.
[17] Wyo. Stat. Ann. § 33-28-310 (2017).
[18] Wyo. Stat. Ann. § 33-28-306 (2017).
[19] Id.
[20] Wyo. Stat. Ann. § 33-28-111 (2017).
[21] Id.
[22] Wyo. Stat. Ann. § 33-28-302 (2017).

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State Law Based Changes

NAR's State Law Based Changes is a compilation of new types of laws collected over the past few years. This resource is helpful to guide states that may want to adopt similar laws in their state.

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Read a summary of this quarter's additions to the State Law Based Changes.