As the country’s population ages, professionals in all industries must be aware of issues specific to working with elderly clients. Two Agency cases this quarter address issues important to real estate professionals who provide services to elderly clients. In the first case, the estate of the elderly client claimed the licensee should have known the client’s mental capabilities were slipping and he was not capable of undertaking a real estate transaction. In the second case, the court concluded that the brokerage firm could be vicariously liable for the licensee’s financial exploitation of an elderly client.
- Van Heyde v. Miller, 799 S.E.2d 133 (W. Va. April 20, 2017)
There was no evidence that licensees knew or should have known that elderly client did not understand the real estate transaction.
The seller’s estate sued the real estate licensees who acted on seller’s behalf in the sale of his property for breach of contract and breach of fiduciary duty. The seller, an elderly man, met with a real estate licensee regarding sale of the property, and decided to sell the property for $90,000. The price included the surface and mineral rights to the property. The licensee’s daughter, also a real estate licensee, met with the buyers of the property. In the transaction, the mother and daughter licensees acted as dual agents for both parties. Less than a week after the closing, the client died from a condition believed to be related to Alzheimer’s disease. The estate claims the seller did not wish to include mineral rights in the purchase price, and that the licensees knew or should have known that the seller was not mentally capable of legally transferring the property due to a decline in his mental health.
The trial court granted summary judgment for the defendants. The appellate court affirmed summary judgment on the contract claim, finding that the estate did not present any evidence suggesting that the seller failed to understand his decision to convey both surface and mineral rights. Both the closing attorneys and a doctor who treated the client near the closing testified that he appeared to understand his actions. Likewise, there was no breach of fiduciary duty because the property was listed in accordance with the seller’s wishes. The dual agency was consistent with professional standards, and was approved by the seller. The court affirmed summary judgment for the licensees.
- Trevarthen v. Wilson, No. 4D16-2032, 2017 WL 1718814 (Fla. Dist. Ct. App. May 3, 2017)
Broker could be vicariously liable for licensee’s alleged
financial exploitation of elderly client.
A 93-year-old woman sued a licensee and his brokerage firm, claiming that the licensee exploited and abused her by using her money to pay for his personal expenses, causing her to engage in multiple real estate transactions for his benefit and purchasing a condominium in his own name with her money. Plaintiff alleges the broker is vicariously liable for the licensee. The brokerage firm’s principal acted as sales agent for the condominium transaction. The brokerage firm moved for summary judgment, arguing that the acts of the licensee were outside the scope of his work for the broker. The trial court granted summary judgment for the broker on vicarious liability.
The appellate court found that the broker could be vicariously liable for the acts of the licensee. The broker received a commission from the deal and may have had knowledge of the licensee’s wrongful use of funds. Accordingly, the appellate court reversed summary judgment, and remanded the case for further proceedings.
3. Toranji v. Lim, 2017 WL 2665220 (Cal. App. Ct. June 21, 2017)
Prospective buyers failed to adequately prove damages resulting from licensee’s failure to communicate a competing offer.
The prospective buyers of a home sued the real estate licensee and brokerage firm who acted as dual agent in the transaction. The buyers argue that the licensee failed to timely communicate their counteroffer to purchase a home. The buyers made an offer to purchase the property and the bank, which owned the home, responded with a counteroffer. Although the buyer authorized an increased offer and the licensee testified that he orally relayed the offer to the bank’s representative who rejected the offer, there was no written denial of the offer. Without a formal response to the buyers’ offer, the buyers refused to consider the bank’s next counteroffer. During these negotiations, an offer was made from another prospective buyer. The bank ultimately accepted the competing offer after the buyers did not promptly reply to its counteroffer.
Following a bench trial, the trial court entered judgment that awarded plaintiffs $409,846 in damages for defendants’ failure to notify the buyer of competing offer. The court determined that the buyers incurred damages as a result of the licensee’s failure to communicate the counteroffer. The court’s damages determination was based on the difference between the property’s fair market value and the amount the court found plaintiffs would have paid for the property. The buyers submitted a RealtyTrac foreclosure status sheet containing an estimated fair market value of the property as evidence of valuation of the property. The appellate court found that this evidence was insufficient to prove the property’s fair market value as a matter of law. Without such evidence, the buyer failed to prove damages resulting from the licensee’s conduct, and the judgment was reversed.
B. Statutes and Regulations
Colorado issued an amended statute which defines the “standard form” documents that may be used by licensees in real estate transactions. Under the statute, standard form means:
(a) a form promulgated by the Real Estate Commission,
(b) a form drafted by a licensed Colorado attorney representing the broker or brokerage firm,
(c) a form provided by a party to the transaction if the broker is a transaction broker or agent for the party providing the form,
(d) a form prescribed by a government agency or lender regulated by law,
(e) a form issued by the Colorado Bar Association,
(f) a form used for disclosure purposes only,
(g) a form prescribed by a title company, or
(h) a letter of intent created by a broker.
When using the standard form, the broker may only insert transaction-specific information. The broker may explain the circumstances in which the form is used, but should advise the parties that forms have legal consequences and the parties should consult with legal counsel before signing.
Michigan, Nebraska, Rhode Island, Tennessee, Texas - Advertising
A number of states recently issued new or amended statutes or regulations regarding licensee advertising. As detailed below, four states – Michigan, Nebraska, Tennessee, and Texas – all issued rules that require licensee advertising to include the broker name. Likewise, the Rhode Island Department of Business Regulation issued a notice reminding licensees that advertising must include the broker name.
Michigan’s amended statute regarding licensee advertising requires the business name of the employing broker to be equal to or larger than the licensee name, and the advertising must also include the telephone number or address of the employing broker. A licensed broker may advertise property that he or she owns personally in his or her own name if the advertising indicates the seller is a licensee. A licensed salesperson shall not advertise property under his or her own name unless it is the salesperson’s principal residence.
Licensee advertising in Nebraska must include the broker name in a prominent, conspicuous, and easily identifiable manner.
In Tennessee, the brokerage firm name must appear in letters the same size or larger than the name of the licensee or team. The amended regulations also add a section regarding social advertising. Social media advertising must include the firm name and telephone number and must not be more than one click away from the viewable page.
The Texas statute also states that the advertising may not imply that the salesperson is responsible for the operation of the real estate brokerage business. In addition, a licensee is prohibited from using all or part of the seal, logo, or name of the Texas Real Estate Commission or another governmental agency in a manner that implies the licensee is a governmental agency, is endorsed by the Commission or other agency, or holds special status that the Commission or another agency has not granted. The Commission’s rules regarding advertising may not require licensees to use the term broker or agent, to include the license number, or to reference the Commission.
The Rhode Island Department of Business Regulation Notice states that licensees may not advertise in a way that is misleading, the advertising must include the brokerage name, and the advertising may not imply common ownership among licensees. The licensee name must be in print smaller than the brokerage name.
Louisiana, Nebraska, Oklahoma – Teams and Team Advertising
Under an amended regulation in Louisiana, licensees who are part of a team may not receive compensation from other team members.
Nebraska and Oklahoma both issued new rules regarding teams and team advertising. In Nebraska, real estate team names must include the word “team” or “group.” Team names may not use the following words: REALTORS®, Company, Corporation, Corp., Inc., LLC, LP, or LLP. Team names may include the words “real estate” or “realty” only if those terms are immediately followed by the word “team” or “group.” If a team leader’s license is suspended or revoked, the team must designate a new leader. If the team is named after a member whose license is suspended or revoked, the team must designate a new name which does not use the suspended member’s name. Team advertising must include the team name and must prominently display the broker’s name adjacent to the team name in similar or larger size.
Beginning November 1, 2017, real estate teams in Oklahoma must register with the Oklahoma Real Estate Commission. A team is defined as any two or more licensees who work under the supervision of the same broker, work together on real estate transactions to provide brokerage services, represent themselves to the public as a team, and are designated by a team name. Team advertising must include the broker’s name in a prominent, conspicuous, and easily identifiable manner.
Louisiana, Rhode Island – Escrow Deposits and Failed Real Estate Transactions
Both Louisiana and Rhode Island amended their rules regarding the return of escrow deposit money following a failed real estate transaction. Under the rule in Louisiana, if a broker cannot reach the parties to a failed real estate transaction, the broker may return the escrow deposit monies in accordance with the Uniform Unclaimed Property Act. In Rhode Island, brokers, licensees, and escrow agents must pay all sums of money held in an escrow account within 10 days of receipt of a written release signed by all parties to a failed real estate transaction.
Louisiana issued a new regulation regarding broker supervision. A supervising broker must provide written notice to licensees of the activities that the broker authorizes for the licensee. The supervising broker must have written policies and procedures regarding recordkeeping and compliance with advertising and team rules. Brokers must maintain disclosures, agreements, contracts, receipts and disbursements of compensation, appraisal and market analyses, and termination paperwork for at least five years.
Nebraska also amended its statute regarding licensee conduct to state that it is an unfair trade practice for a broker or licensee to collect earnest money or other money paid to him or her until the real estate transaction has been consummated or terminated. Payment for goods or services rendered by a third party on behalf of a client is not considered compensation to the broker or licensee as long as the payment does not include profit or compensation for services rendered by the broker/licensee and the broker retains a record of the payment to the third party.
An amended regulation in Texas requires a licensee to be present at a showing of a property. To “show” a property means causing or permitting the property to be viewed by a prospective buyer or tenant, unlocking or providing access, or hosting an open house. A licensee may permit unescorted access to a prospective tenant only if the property is vacant, the licensee has a method to control access and verify identity, and the property owner signed a written consent.
A new statute and corresponding regulation change addresses equitable interests in property. A person may acquire an option or interest in a contract to purchase real property and then sell or offer to sell the option or assign the contract without holding a license if:
- the person does not use the option or contract to engage in real estate brokerage; and
- the person discloses the nature of the equitable interest to any potential buyer.
A person who sells an option or offer to assign without disclosing the nature of that interest to a buyer is engaging in real estate brokerage. A licensee who engages in real estate brokerage must disclose to the seller or buyer that the principal is selling or buying and does not have legal title to the property.
C. Volume of Materials Retrieved
Agency issues were identified 9 times in 6 cases (see Tables 1, 2). Dual Agency, Vicarious Liability, Breach of Fiduciary Duty, and Agency: Other issues were each addressed in multiple cases this quarter. Thirteen Agency statutes and twenty regulations were retrieved (see Table 1).
 This second quarter update reviews legislative activity from the following jurisdictions: Alabama, Alaska, Colorado, Connecticut, Delaware, Florida, Hawaii, Louisiana, Maine, Minnesota, Missouri, Nebraska, Nevada, New Hampshire, Oklahoma, Oklahoma, Rhode Island, South Carolina, Tennessee, Texas, and Vermont.
 Tenn. Comp. R. & Regs. 1260-02-.12 (2017).
 Okla. Stat. tit. 59, § 858-305 (2017); Oklahoma Real Estate Commission, SB0266 FAQ (2017).
 Okla. Stat. tit. 59, § 858-305 (2017).