Going to the Source
Minimize your liability by providing attributions.
estate agents and brokers often make disclosures without attributing
information sources. In so doing, they become the source of the information.
When the information is accurate, there is no problem. When the information is
inaccurate, however, the agent or broker, as the source of the inaccurate
statement, bears responsibility for the statement.
discussed below, by attributing the source of the information, an agent or
broker can avoid, or at least attempt to avoid, liability for any unintentional
errors in information passed along.
recent California appellate decision, Saffie v. Schmeling (2014) 224
Cal.App.4th 563, the court found that the listing broker was not liable even
though he disclosed erroneous information upon which the buyer had relied. In
that decision, the listing broker made the following statement on a multiple
listing service in marketing his client’s property: “This parcel is in an
earthquake study zone but has had a Fault Hazard Investigation completed and
has been declared buildable by the investigating licensed geologist. Report
available for serious buyers.” Unfortunately, it turned out that the parcel was
the time of the 1982 report referenced in the MLS and the time of the 2006
statement in the MLS, the 1994 Northridge earthquake had occurred. While
pre-Northridge earthquake seismological regulations may have permitted the
development of the parcel, post-Northridge earthquake seismological regulations
did not. Unaware of this change in regulations and in reliance on the statement
that the parcel was “buildable,” the purchaser bought the property. The
purchaser thereafter “began to try to develop the property,” but “could not
feasibly move forward with his plans for a commercial building on the property”
and brought suit against, among others, the listing broker.
court rejected the claims of the purchaser against the listing broker. It noted
that, as the listing broker did not represent the purchaser, the listing broker
did not owe the purchaser a fiduciary duty. Instead, the listing broker simply
owed the purchaser the general duty of “honesty, fairness, and full disclosure
toward all parties” owed by agents and brokers throughout the country absent a
fiduciary relationship. The court then found that the listing broker’s
statements complied with this standard. Although the property was not
buildable, “seller’s broker never said that it was.” The listing broker merely
stated that the “parcel ... has been declared buildable by the investigating
licensed geologist.” That statement was, in fact, true.
providing the source of the information, the listing broker was found not to be
liable even though he had provided material information that turned out not to
better appreciate the foregoing principle, as well as its limits, consider the
following alternative scenarios.
the listing broker, in reliance on the report of the licensed geologist, simply
stated that the “parcel was buildable” instead of stating it had been “declared
buildable by the investigating licensed geologist.” Would the listing broker be
liable? Yes. The listing broker would now be the source of the information and
the statement that the parcel was buildable would be false.
the listing broker knew that seismic regulations had changed and that the
report was no longer reliable, could he still disclose that the parcel had been
“declared buildable by the investigating licensed geologist” without liability?
No. While the statement would be technically true, it would be nonetheless
misleading as the listing broker knew the true facts to be otherwise.
the listing broker had two reports in his possession, both by licensed geologists?
One report indicates that the parcel is buildable and the other indicates that
it is not. The listing broker genuinely believes the former to be more reliable
and thus only discloses that report. If the property turned out not to be
buildable, would the listing broker be liable for not turning over the other
report? Yes. The listing broker has an obligation to disclose all known,
material information concerning the value or desirability of the property. Both
geological reports concerned value and desirability and therefore both needed
to be disclosed.
because perceived to have deep pockets, known to have insurance to cover
losses, or genuinely believed to be responsible, real estate agents and brokers
are almost always brought into lawsuits when deals go bad. While real estate
agents and brokers cannot insulate themselves from liability, attributing the
source of information is an important measure that can be taken to limit
Ponist is the owner of the Law Offices of Sean Ponist, P.C., a firm
specializing in real estate, construction, and business litigation. Contact him
article is for informational purposes only and not for the purpose of providing
legal advice and is not to be acted on as such.