AGENT ACCOUNTABILITY
AND LIABILITIES
Presented By:
Instructors:
Andrew Treuting & David Vicknair
About Your Instructors
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Andrew Treuting
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Title Stream, LLC
Smith & Treuting, LLC, Attorney at Law
David Vicknair
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Scott, Sevin & Vicknair
COURSE OBJECTIVES
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Identify situations that create liability for
agents and their clients
Discuss the ways to avoid or minimize agent
and client exposure
LEGAL DUTIES OF AGENTS
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La R.S. Title 9 arts. 3891 - 3899
La R.S. Title 37, Chapter 17 – Louisiana Real
Estate License Law
DUTIES TO CLIENTS
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Perform the terms of the brokerage
agreement with client
Promote the best interests of the client by:
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Sticking to the agreed upon terms
Timely presenting all offers to and from client
Timely accounting for all client’s money and
property received
Exercise reasonable skill and care
DUTIES TO CUSTOMERS
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Treat customers honestly and fairly
REAL ESTATE AGENT LIABILITY
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2 WAYS TO INCUR LIABILITY WHEN
ACTING AS AN AGENT:
1.
FRAUD (INTENTIONAL MISREPRESENTATION)
2.
NEGLIGENT MISREPRESENTATION
LSA-C.C. Art. 1953 - FRAUD
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An intentional misrepresentation or a
suppression of the truth
Done to obtain an unjust advantage or cause
a loss to the other party
May result from silence or inaction
NEGLIGENT MISREPRESENTATION
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LSA-C.C. art. 2315 - Every act whatever of
man that causes damage to another obliges
him by whose fault it happened to repair it
Occurs when there is a legal duty to supply
correct information and a breach of that duty
results in damages --- detrimental reliance
FALSE INFORMATION
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Not liable to a client / customer unless the
licensee knew or should have known it was
false
Detrimental Reliance
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A party may be obligated by a promise when
he knew or should have known that the
promise would induce the other party to rely
on it to his detriment and the other party was
reasonable in so relying.
Recovery may be limited to the expenses
incurred or the damages suffered as a result
of the promisee's reliance on the promise.
CASE STUDIES
Duplechin v. Adams, 665 So.2d 80
(La.App. 1st Cir. 1995)
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Buyer of sinking house sues seller and listing
agent under redhibition, fraud and negligent
misrepresentation
Testimony established that the sinking was
apparent through multiple cracks, swinging
doors, etc…
Agent “glossed over” the problems
Duplechin v. Adams, 665 So.2d 80
(La.App. 1st Cir. 1995)
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“In order for a plaintiff to recover for negligent
misrepresentation, there must be a legal duty
on the part of the defendant (agent) to supply
correct information, a breach of that duty, and
damage to the plaintiff caused by the
breach.”
Agent owes a specific duty to communicate
accurate information to the seller and
purchaser
Hancock v. Lauzon, 161 So.3d 957
(La.App. 2nd Cir. 2015)
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Suit for negligent misrepresentation
regarding in connection with property
disclosure portion due to backyard flooding
Question: Was flooding an “apparent” or
“redhibitory” defect
Question: Was disclosure of a sump pump in
MLS adequate?
Hancock v. Lauzon, 161 So.3d 957
(La.App. 2nd Cir. 2015)
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“Where the alleged misrepresentation of a
real estate agent to a buyer relates to defects
which are apparent and discoverable on
simple inspection, and where the buyer
inspects the property before the sale, the
buyer cannot complain of fraud or negligent
misrepresentation”
Cormier v. Coldwell Banker, 150 So.3d
557 (La.App. 3rd Cir. 2014)
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Suit against listing agent (RELO) for failure to
disclose accurate property acreage and
“knowingly misrepresenting the boundary
lines”
Recovery sought based on detrimental
reliance
Duty to disclose…extends only to those
defects (issues) of which the agent is aware
Louisiana Warranties
Implied Warranty of Merchantability
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Property can be sold or mortgaged in the
ordinary course of business by reasonable
persons familiar with the facts and questions
involved
Title is not suggestive of litigation
SALE WITH WARRANTIES
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“The SELLER and the BUYER acknowledge
that this sale shall be with full SELLER
warranties as to any claims or causes of
action including but not limited to redhibition
pursuant to Louisiana Civil Code Article
2520, et seq. and Article 2541, et seq.”
Warranty Against Redhibitory Defects
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A hidden defect that renders the thing
useless or so inconvenient that buyer would
not have bought it or would have paid less
Gives rise to rescission of sale or reduction
of the price
Apparent Defects
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No call in warranty if defect is known or
easily discoverable by a reasonably prudent
buyer
Thing Fit for Ordinary Use
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When the seller has reason to know the
particular use the buyer intends for the thing,
or the buyer's particular purpose for buying
the thing, and that the buyer is relying on the
seller's skill or judgment in selecting it, the
thing sold must be fit for the buyer's intended
use or for his particular purpose.
Prescriptive Period
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If seller knew of the defect, one year from the
date of discovery by the buyer
If seller did not know, one year from the date
of delivery of the property
Liability of Seller – LSA-C.C. art. 2345
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A seller who knows that the thing he sells has a
defect but omits to declare it…or declares that the
thing has a quality that he knows it does not have is
liable to buyer for:
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return of the price with interest from the time it was paid
reimbursement of the reasonable expenses incurred for the
sale and preservation of the thing
Other damages
reasonable attorney fees.
Liability of Seller – LSA-C.C. art. 2345
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A seller is deemed to know that the thing he
sells has a redhibitory defect when he is a
manufacturer of that thing
WAIVER OF IMPLIED WARRANTIES
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Must be written in clear and unambiguous
terms
Must be contained in the sale document
Must be brought to the attention of the buyer
or explained to him
SALE “AS IS” WITHOUT WARRANTIES
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The SELLER and the BUYER hereby acknowledge
and recognize that the Property being sold and
purchased is to be transferred in “as is” condition
and further the BUYER does hereby waive, relieve
and release the SELLER from any claims or causes
of action for redhibition pursuant to Civil Code Article
2520, et seq. And Article 2541, et seq. or for
reduction of Sale Price pursuant to Louisiana Civil
Coe Article 2541, et seq.
SALE “AS IS” WITHOUT WARRANTIES
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Additionally, the BUYER acknowledges that
this sale is made without warranty of fitness
for ordinary or particular use pursuant to
Louisiana Civil Code Article 2524. The
SELLER and BUYER agree that this clause
shall be made a part of the Act of Sale.
PROPERTY SOLD “AS IS”
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Simply saying that the property is being sold
“AS IS” is not enough
“AS IS” waiver in LA contract effectively
waives all implied warranties except title
Limitations on “As-Is” Waiver
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Purchaser must show fraud to defeat the
waiver
Fraud carries tremendous burden of proof
RECALL LSA-C.C. Art. 1953 - FRAUD
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An intentional misrepresentation or a
suppression of the truth
Done to obtain an unjust advantage or cause
a loss to the other party
May result from silence or inaction
CASE STUDIES
Creger v. Robertson, 542 So.2d 1090
(La.App. 2nd Cir 1989)
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Suit in redhibition for reduction of purchase
price for “soiled” carpet
“A sale made “as is” is not a waiver of all
warranties”
“A buyer is only under a duty to make an
inspection which is reasonable in light of all
the circumstances…”
Batt v. Cohen, 139 So.3d 1284 (La.App.
4th Cir 2014)
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Suit in redhibition by dentist against seller of
commercial office space
Illustrates the importance of a solid waiver
Louisiana New Home Warranty
Act (NHWA)
LSA-9:3141, et seq.
NEW HOME WARRANTY ACT
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The NHWA promotes commerce in Louisiana
by providing clear, concise and mandatory
warranties for the purchasers and occupants
of new homes in Louisiana,”
Sets out “the exclusive remedies, warranties,
and peremptive periods as between builder
and owner relative to home construction
Warranty Commencement Date
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The date that legal title to a home is
conveyed to its initial purchaser or the date
the home is first occupied, whichever occurs
first.
One Year Following Commencement
Date
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Home will be free from any defect due to
noncompliance with the building standards or
due to other defects in materials or
workmanship not regulated by building
standards
Two Years Following Commencement
Date
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The plumbing, electrical, heating, cooling,
and ventilating systems exclusive of any
appliance, fixture, and equipment will be free
from any defect due to noncompliance with
the building standards or due to other defects
in materials or workmanship not regulated by
building standards.
Five Years Following Commencement
Date
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The home will be free from major structural
defects due to noncompliance with the
building standards or due to other defects in
materials or workmanship not regulated by
building standards.
Major Structural Defects
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Physical damage to the following designated load-bearing
portions of a home caused by failure of the load-bearing
portions … to the extent the home becomes unsafe, unsanitary,
or is otherwise unlivable:
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Foundation systems and footings
Beams
Girders
Lintels
Columns
Walls and partitions
Floor systems
Roof framing systems
What’s Not Included?
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Fences, landscaping, off-site improvements,
all driveways and walkways, or any other
improvement not a part of the home itself.
After the first year, the concrete floor of a
basement and the concrete floor of an
attached or unattached garage that is built
separate from a foundation wall or other
structural element of the home
Case Study
Shaw v. Acadian Builders and
Contractors, LLC, (La. Sup. 12/10/13)
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Buyer sues builder under NHWA for water
damage due to failed stucco?
What constitutes “major structural defect”?
Louisiana Private Works Act
LSA-R.S. 9:4801 et
seq.
The Private Works Act
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Allows persons who perform work or supply
labor or materials in connection with the
improvement of real estate to sue the owner
and contractor for amounts owed
Allows a lien or privilege against the property
to secure the claim against the owner
Who is entitled to the Privilege?
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General and Subcontractors
Laborers or employees of the owner
Suppliers and Materialmen
Lessors and sellers of movables used at the
site
Consultants (engineers, surveyors,
architects)
Prescriptive Period for the lien
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Suit to enforce lien and lis pendens must be
filed within one year f filing the lien
When does the lien period start?
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Starts the moment work is performed or
material is provided.
“A work is a single continuous project for the
improvement, construction, erection,
reconstruction, modification, repair,
demolition, or other physical change of an
immovable or its component parts.”
When does the lien period end?
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Laborers and Materialmen that did not have
contracts with the GC have 30 days to file
after substantial completion
GCs have 60 days from substantial
completion
Lessors of movable have 70 days from
substantial completion
What is Substantial Completion?
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Case-by-case determination
Certificate of Occupancy
Actual Occupancy
Filing of notice
Protecting Owner against claims
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The owner is relieved of the claims against
him and the privileges securing them when
the claims arise from the performance of a
contract by a general contractor for whom a
bond is given and maintained as required by
R.S. 9:4812 and when notice of the contract
with the bond attached is properly and timely
filed
Removing Liens
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Surety bond
Cash bond in the amount of 125% of the
claim amount
Writ of Mandamus (LSA-R.S. 9:4833)
Preventing Title Issues
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Filing Notice of Building Contract
No Work Affidavit
Filing Notice of Termination of Work and/or
Notice of Substantial Completion
Cancellation of Building Contract
SUCCESSIONS - ASSESSING THE
ESTATE
What is a Succession?
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Succession is the transmission of the estate
of the deceased to his successors.
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The successors thus have the right to take
possession of the estate of the deceased
after complying with applicable provisions of
law.
What Makes up the Estate?
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The property, rights, and obligations that a person
leaves after his death.
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The estate includes not only the rights and
obligations of the deceased as they exist at the time
of death, but all that have accrued thereto since
death, and the new charges to which it becomes
subject.
JURISDICTION
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Succession must be opened in either:
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Parish where decedent was domiciled at the time
of death;
If no domicile in LA, parish where decedent
owned property
2 TYPES OF SUCCESSION
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Intestate – No will, so the estate passes to
heirs according to LA law
Testate – Decedent left a valid last will and
testament (olographic or notarial form)
QUESTIONS TO ASK
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Has a Succession been opened?
Is there a valid will?
Has a Judgment of Possession been
rendered?
Is there a usufruct in place?
Is the estate under Administration?
Ordinary or Independent?
What about disclosure?
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If the property is being sold by the
Succession, the seller (estate) is exempt
from completing the property disclosure.
If a Judgment of Possession has been
rendered, heirs are now the owners, and
have a legal obligation to complete the
property disclosure.
Trusts
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Living Trust vs. Testamentary Trust
Ask for a copy of the Trust instrument and
have it reviewed by title attorney
Trust instrument will dictate authority
Trust (extract) must be recorded
Who signs the Listing and Purchase
Agreement?
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If a JOP has been rendered, all owners
If a JOP will be rendered before sale, all
heirs / legatees
If the property is under ordinary
administration, the administrator / executor
will sign, but court approval will be required
If independent, the appointed administrator
Purchaser / Developer
Considerations
Zoning and Permitting
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Determine zoning and permitted uses prior to
expiration of inspection period
While zoning may allow for the client’s
intended use, additional considerations such
as size limitations, parking, drive-through,
etc… may require conditional use approval
Navigating Parish and City
Requirements
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1st, determine what is needed to meet the
client’s needs
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Ex. Variance, zoning change, etc…
2nd, Determine the appropriate process
mandated by the Parish or City
3rd, file necessary applications and attend the
necessary meetings
Zoning Change - City of New Orleans
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Neighborhood Participation Program (NPP)
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Owner consults with the City Planning
Commission (CPC) to determine city criteria, and
the names and addresses for all interested
persons and neighborhood associations within
certain radius of the property
Notice letters sent out containing NPP criteria to
all identified parties and NPP meeting is
scheduled to discuss proposed change
Zoning Change - City of New Orleans
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Neighborhood Participation Program (NPP)
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Full report of the meeting submitted to the CPC,
along with the application, including survey,
architect plans, landscape plans, etc…
CPC reviews the application and makes its formal
recommendations to the City Planning
Committee, who holds a public hearing, and votes
on recommendations to the City Council
City Council votes on the change