Watch Your Step!
The Guide to Representing Home Inspectors and
Real Estate Agents
Christopher B. Block, Esquire
425 Eagle Rock Avenue. Suite 302. Roseland, NJ 07068
P:973.618.4176 • F:973.618.4100 • E:[email protected]
Gawain Charlton-Perrin, Esq.
Direct Phone: 630-760-3077
[email protected]
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DISCLAIMER
• The recommendation(s) and contents of this material are
provided for informational purposes only. This material does
not purport to address every possible legal obligation, hazard,
code violation, loss potential or exception to good practice. It
should not be construed as indicating the existence or
availability of any insurance coverage. Hanover Insurance
Companies and their affiliates and subsidiaries specifically
disclaim any warranty or representation that compliance with
any advice contained herein will make any premises, property
or operation safe or in compliance with any law or regulation.
The Hanover Insurance Group with Eagle Icon is a trademark
of The Hanover Insurance Group, Inc.
• Copyright © 2013
The Hanover Insurance Group, Inc.
OUTLINE
• I.
Real Estate Agent/Broker Common Issues and
Claims
• II. Risk Management Tips
Real Estate Agent/Broker Claims
• I.
Real Estate Agent/Broker Common Issues and
Claims
Real Estate Agent/Broker Claims
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Breach of Fiduciary Duty
Lack of Documentation or Vague Documents
Property Condition and Disclosure
Misrepresentations
Breach of Fiduciary Duty
• Duty of a Fiduciary
– Duty of Loyalty obligates the fiduciary to put the interests
of the client first ahead of the fiduciary’s self interest and
not exploit the relationship for the fiduciary’s personal
benefit
Breach of Fiduciary Duty
• Duty of a Fiduciary
– Scope of Fiduciary Duty
• Skill, care & diligence in the transaction
• Accounting for all funds held
• Presenting all offers and counteroffers in a timely manner unless a
party has previously directed the agent otherwise
• Disclosing all known facts that materially affect the value of real
property and are not readily observable to the buyer
– Seller completes form, but careful if you learn of information to the
contrary to what your seller client is claiming, i.e., neighbor tells you.
Breach of Fiduciary Duty
• 3 out top 10 biggest damage awards involved Breach
of Fiduciary Duty*
– Real Estate Agent accused of derailing a deal by accepting
a second offer while counter-offer pending
– Real Estate Agent represents Seller, Seller advises of
existing dispute with neighbor over surface water
management.
– Cash Back at Closing to “get deal done”
*Source: National Association of Realtors – 2009-2010 Claim Statistics
Lack of Documentation or Vague
Documents
• Marketable Record Title Act (MRTA) – Covenants &
restrictions if not properly re-recorded can expire.
• Seller sells waterfront parcel to develop 8 homes.
Appraisal assumes docks for each home. Buyer
borrows money to close on parcel. After closing
Buyer learns that the parcel does not include the
right to buy docks.
Lack of Documentation or Vague
Documents
• Landlord’s Real Estate agent tells prospective Dentist
Tenant that Landlord would pay up to $75K to
retrofit property for Dentist Practice. Lease language
is ambiguous and could be interpreted to mean that
Landlord will pay any amount, even in excess of
$75K. Tenant sued Agent and Landlord.
• Buyer’s Real Estate Agent cannot prove that he
emailed Inspection report to Buyer. Buyer sued
Agent.
Property Condition and Disclosure
• Buyer claims Seller’s Real Estate Agent told him that
A/C Unit was brand new, when it was in fact 5 years
old and malfunctioned. Note Seller’s Disclosure
indicated new A/C unit also. Buyer sued Agent and
Seller
Property Condition and Disclosure
• Buyer claims Seller’s Real Estate Agent told him that
roof had no material deficiencies; however, when it
leaked, Buyer found out that the Roof Repair
Company had been out to inspect same roof when
Seller owned the house and told Seller that the roof
had “major” deficiencies. Roofer even had pictures
of roof from original site visit. Seller had told Roofer
that he didn’t want to repair roof at that time. Note
that Seller’s Disclosure indicated roof had no
material deficiencies. Buyer sued Agent and Seller.
Misrepresentations
• Tenant claims Landlord’s Real Estate Agent said that
Landlord would upgrade property at Landlord’s
expense when Landlord did no upgrades. Tenant
sued Agent and Landlord.
• Buyer claims Seller’s Real Estate Agent said that the
road in front of the home was zoned to be snow
plowed by municipality during winter when it was in
fact not zoned in such a manner. Buyer sued Agent
and Seller.
Misrepresentations
• Real Estate Agent tells Buyer that they could build a
house on property when Agent knew that the
property could not be built on. Buyer sued Agent
and Seller.
• Seller tells his Real Estate Agent that there no
material deficiencies on the property. A neighbor
calls Agent prior to closing and tells Agent that there
was a sinkhole on the property. Agent does nothing.
Buyer sued Agent and Seller.
Risk Management Tips
• II. Risk Management Tips for Real Estate
Agents and Brokers
Risk Management Tips
• Be aware of your role – who you represent
• Be careful what you say
– Be truthful
• Document, document, document in writing
– If not in writing, it didn’t happen
– Can you prove you sent document?
• Be diligent and aware of all deadlines
Risk Management Tips
• Take Continuing Education Courses
• Recommend Home Inspections
– In Writing
• Recommend Home Warranties
– In Writing
• Never leave blanks on any written document
• Get all signatures
• Do not delay in communicating offers or responses
to offers
– Keep written proof of transmittal
Risk Management Tips
• Never notarize a signature signed outside of signer’s
presence
• Don’t give legal advice or advising of rights
– Encourage clients to retain an attorney
– Never offer opinion on legal issues, zoning, property
boundaries or anything not on MLS
• Stay away from dishonest or shady clients
– Will get dragged into any litigation involving them
Risk Management Tips
• NO GOOD DEED GOES
UNPUNISHED!
QUESTIONS?
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Gawain Charlton-Perrin
The Hanover Insurance Group
Professional Liability Claims and Risk Management
(630) 760-3077
[email protected]