Two of the Agency cases retrieved this quarter involved a scenario in which the licensee had a relationship with one of the parties involved in the transaction, but acted as dual agent for the real estate transaction. In the first case, the court held the broker did not owe any fiduciary duty because he acted as dual agent, but could potentially be liable on other claims. In the other case, a jury awarded damages to the purchaser who purchased the property from the licensee’s company at a price above the actual valuation.
AGENCY CASES FROM EARLIER EDITIONS
Earlier this year, we examined both of the following cases. Interestingly, both cases address the boundaries of a licensee or broker’s duty with respect to elderly clients. As the country’s population ages, this issue may become an issue of increasing concern for real estate professionals.
Van Heyde v. Miller, 799 S.E.2d 133 (W. Va. April 20, 2017) . The seller, an elderly man, met with a real estate licensee regarding sale of his property, and decided to sell the property for $90,000. The price included the surface and mineral rights to the property. The man’s estate claims that he 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 appellate court affirmed summary judgment for the licensee. The court concluded that the estate did not present any evidence suggesting that the seller failed to understand his decision to convey both surface and mineral rights. There was also no breach of fiduciary duty because the property was listed in accordance with the seller’s wishes.
Trevarthen v. Wilson , No. 4D16-2032, 2017 WL 1718814 (Fla. Dist. Ct. App. May 3, 2017) . 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. The appellate court found that the broker could be vicariously liable for the acts of the licensee. The broker received a commission from the sale of a condominium 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.
1. Busch v. Domb, No. 17-2012, 2017 WL 6525779 (E.D. Pa. Dec. 21, 2017)
Broker who acted as dual agent did not owe fiduciary duties to seller.
A property seller entered into a listing agreement with the defendant real estate brokerage to list and sell her home. The brokerage firm presented the seller with two potential buyers who made offers well below the asking price. The brokerage firm advised the seller to accept one of the offers. The seller accepted an offer significantly below the asking price, and the broker represented both parties in the transaction as a dual agent. Ten days after closing, the seller discovered that the buyers, real estate investors who had worked with the broker on numerous prior occasions, re-listed the home on the broker’s website and sold the home for the seller’s original asking price shortly thereafter.
The seller brought claims for misrepresentation, breach of fiduciary duty, breach of contract, and consumer fraud against the brokerage firm. The trial court held that the broker did not owe a fiduciary duty to the seller because the broker was acting as a dual agent. The court concluded that dual agents are not fiduciaries because “the relationship between a dual agent and one of its principals does not rise to” the level of a special relationship where one party exerts influence over the other. As such, the broker did not owe any duties beyond that provided in the contract. Therefore, because the fiduciary duty claim was essentially the same as the breach of contract claim, the court granted the broker’s motion to dismiss the breach of fiduciary duty claim. The court denied the broker’s motion to dismiss all of the other claims.
2. Samulska v. Machiote, 13-2015-CA-014064, 2017 WL 2645241 (Fla. Cir. Ct. Mar. 30, 2017)
Buyer’s representative liable where he failed to disclose to buyer that his company owned the properties and sold them above their valuation.
A home purchaser hired a licensee to assist her in purchasing two residential properties. After purchasing the properties, the buyer learned that she had purchased them from the licensee’s company at a price above the actual valuation. The licensee acted as dual agent in the real estate transaction.
The purchaser sued the licensee and his company for theft, unfair business practices, and fraud in the inducement. The purchaser also alleged that the licensee failed to act as a fiduciary. Following a jury trial, the jury awarded $10,000 in damages to the purchaser.
Claim against licensee was barred by statute of limitations and fact that licensee was not a party to the real estate contract.
3.Hill v. Hartness, No. CV-17-283, 2017 Ark. App. 664 (Dec. 6, 2017)
Claim against licensee was barred by statute of limitations and fact that licensee was not a party to the real estate contract.
A licensee and brokerage represented the purchasers in buying a home. The home purchasers allege the licensee failed to provide them with the disclosure provided by the seller, which indicated settling issues on the property, and advised them not to obtain an inspection of the home. The purchasers brought claims for breach of fiduciary duty, breach of contract, negligence, and unfair trade practices. The trial court granted summary judgment for the licensee. The court concluded that (1) the fiduciary duty, negligence, and other tort claims were barred by the three-year statute of limitations, and (2) the breach of contract claim was not viable because the licensee was not a party to the contract.
The appellate court affirmed application of the three-year statute of limitations, holding that the statute of limitations ran from the time of the negligent act, which was prior to closing, rather than from the time of closing. The appellate court also agreed with the trial court that the licensee was not a party to the real estate contract. According to the appellate court, although Arkansas Real Estate Commission regulations required the licensee to sign the real estate contract, the contract clearly stated the parties were the buyer and the seller. The court noted that there may be a professional services contract between the purchaser and the licensee, but that would be separate from the real estate contract. The appellate court affirmed summary judgment for the licensee.
4. Cabral v. Drouin, No. 17 MISC 000616(KFS), 2017 WL 5179119 (Mass. Land. Ct. Nov. 8, 2017)
Licensee did not have authority to bind the seller during exchange of text messages with would-be purchaser.
The purchaser of a home sought to hold the seller of the home to a real estate agreement. The would-be purchaser exchanged text messages with the seller’s real estate representative, and argues that those messages resulted in a binding agreement to purchase the property. The seller argues the real estate representative was not authorized to accept offers on the seller’s behalf.
The court found that no agreement existed between the purchaser and seller. The seller’s real estate representative notified the purchaser that she would need to consult with the seller. The court also noted that the text messages exchanged between the parties did not contain the material terms necessary to make an agreement. Furthermore, the text messages were not signed and the real estate representative informed the purchaser that she did not have authorization to bind the seller. The court granted the seller’s motion to dismiss the claims.
B. Statutes and Regulations
The existing agency disclosure law was amended to provide that a real estate licensee who represents a seller, lessor, prospective purchaser or lessee in transaction must disclose, in writing, the identity of his or her client to any party to the transaction who is not represented by another real estate licensee.1
The Hawaii Real Estate Commission issued a Bulletin explaining state laws regarding real estate teams.2 The Bulletin notes that Hawaii law requires advertisements to include either the brokerage name or a registered trade name used by the brokerage. The team name may be included in addition to the brokerage name.
The Idaho Real Estate Commission published a newsletter article explaining the changes to the state’s advertising law. The article notes that the new law states that a broker’s name must appear “clearly and conspicuously” on all advertisements.3
The Kansas Real Estate Commission revised its sample agency disclosure forms. The forms may be modified by the licensee, provided the modifications do not violate state law.4 The Commission also published articles in its newsletter reminding licensees that advertisements must include the supervising broker’s name, and another article that reminded licensees of the requirements for “Coming Soon” listings. The reminder states that licensees must have “an effective agreement to market the property” before placing a sign on the property.5
Maryland modified its licensee agency requirements to provide that it is not a breach of fiduciary duty to discuss other properties with potential buyers or lessees at an open house. The licensee must have the written consent of the seller or lessor to do so.6
In Missouri, team names need to be registered as trade names with the Missouri Secretary of State and with the Missouri Real Estate Commission.7
The Nebraska Real Estate Commission issued a Policy and Interpretation regarding “Coming Soon” listings. Nebraska has no specific rules or laws on such advertising, but the Commission interprets the general advertising rules as requiring an active listing agreement and consent of the owner before property can be advertised.8 The Commission’s newsletter included articles that discuss the general duties of a real estate licensee, and the specific duties regarding the Seller’s Property Disclosure Statement. Licensees are reminded that they have a fiduciary duty towards their clients, and that duty includes the obligation to “promote the interests of the client with the utmost good faith, loyalty, and fidelity.”9
The Nevada Real Estate Division issued an explanation of the use of the official “Duties Owed” disclosure form. The Division recommends that all parties, including unrepresented parties, sign a single copy of the form. Confirmation of the disclosure is required, and a separate consent to dual representation is needed.10
The North Dakota Real Estate Commission published a newsletter article regarding “Coming Soon” listings. North Dakota law requires a signed listing agreement before an advertisement may be placed. The client should also agree with the advertising approach taken.11
The South Dakota Real Estate Commission reminded licensees of the four types of agency recognized in South Dakota: Single Agency (representation of one client); Appointed Agency (a responsible broker names an agent to represent a client); Limited Agency (representation of both parties to a transaction); and Transaction Brokerage (assisting one or more parties without representing them as an advocate).12
The Real Estate Division newsletter included an article explaining the legal implications of the use of addenda in documents. Addenda are used to change or add detail to standard form contracts. Changes to contracts must be done by use of an addendum, and not by altering the physical document.13
The Washington Department of Licensing issued comprehensive guidelines for advertising by real estate licensees. All advertising must include the firm’s licensed name in a clear and conspicuous manner. “Clear and conspicuous” means that the firm name must be “presented in a manner so as to be readily noticed and understood.” All Internet advertising must include the firm name as well as the broker’s or managing broker’s name. This information must be included on every viewable page of a licensee website. The guidance provides examples of deceptive or misleading advertisements.14
C. Volume of Materials Retrieved
Agency issues were identified 50 times in 36 cases (see Table 1 and Table 2; note that some cases address multiple issues). Breach of Fiduciary Duty, Dual Agency, Agency: Other, Buyer Representation, and Vicarious Liability were the most frequently addressed topics (see Table 2). Two statutes and fifteen regulations or publications from regulators addressing Agency issues were retrieved (see Table 1). These items addressed Agency Disclosure, Teams, Coming Soon Listings, Breach of Fiduciary Duty, and Agency: Other.1 Ct. Gen. Stat. § 20-325d , as amended by P.L. 17-169 .
2 Hawaii Real Estate Commission Bulletin, November 2017.
3 Idaho Real Estate Commission, The Real Estatement, July 2017 .
4 Kansas Real Estate Commission Agency Disclosure Form .
5 Kansas Real Estate Commission Newsletter, October 2017 .
6 Md. Code Ann. Bus. Occ. & Prof. § 17-532 (2017) .
7 Missouri Real Estate Commission News Bulletin, July 2017 .
8 Nebraska Real Estate Commission Policy and Interpretation 40 .
9 Nebraska Real Estate Commission Comment, Winter 2017 .
10 Nevada Real Estate Division Bulletin 34 .
11 North Dakota Real Estate Commission News & Views, Fall 2017 .
12 South Dakota Real Estate Commission VIEW, Fall 2017 .
13 Utah Real Estate Division Newsletter, Fourth Quarter 2017 .
14 Washington Department of Licensing Real Estate Advertising Guidelines .