Agency Highlights: 1Q 2016

A. Cases

1. Humphries v. Becker, No. 41897, 2016 WL 275310 (Idaho Jan. 22, 2016)

Seller’s son and daughter-in-law did not serve as seller’s representative in the sale transaction and were not liable for any misrepresentations in the disclosure form, even though they provided information for the form.

Several months after purchasing a property, the purchasers learned that they did not have water rights to the well to which the sprinkler system on their property was connected. Purchasers sued the seller and the seller’s son and daughter-in-law (“Children”) for fraud and misrepresentation with respect to statements made about sources of water to the property. Purchasers alleged that the Children acted as the seller’s representative in the transaction, and made misrepresentations regarding water sources. The Children had lived on the property for many years and had knowledge of the property, while the seller had only recently traded properties with the Children to obtain ownership of the property prior to the sale.  The Children provided information about the property to the seller and her representative to assist in drafting the disclosure form and MLS listing.

The court found there was no agency relationship between the Children and the seller, and that the Children did not make any affirmative statements of fact regarding water sources on the property.  Despite the Childrens recent residence and knowledge of the property, they had no duty to disclose any information regarding statements in the property disclosure form or MLS listing because they were not parties to the contract.  Summary judgment for the Children was affirmed, but the court reversed summary judgment in favor of the seller, who could be held liable for possible misrepresentations regarding water sources to the property in the disclosure form.

2.Spies v. Deloach Brokerage, Inc., CV 214-053, 2016 WL 901300 (S.D. Ga. Mar. 3, 2016)

Licensee did not owe a fiduciary duty to a purchaser while serving as a transaction broker.

After closing on a property, the purchaser discovered that she could not install a spa due to erosion issues on the land. The purchaser brought claims for fraud, breach of contract, and statutory violations against the licensee who assisted her with the transaction. According to the purchaser, the licensee should have known about the erosion because he had knowledge about the island and lived near the property.

Because there was no written representation agreement between the parties, the listing broker served as a transaction broker and only owed limited statutory duties to the client.  The court held that there was no fiduciary or confidential relationship between the purchaser and the licensee because they did not sign an agreement or other writing that would establish such a relationship between them. The court also did not imply a fiduciary relationship based on the parties’ behavior.  The purchaser was a sophisticated party and there was no evidence that the licensee tried to take advantage of or defraud her, so the licensee did not implicitly undertake a fiduciary obligation to the purchaser. Furthermore, the licensee did not conceal the erosion, and did not know of the issue because it was not possible to detect the erosion from mere observation of the land. The court granted summary judgment in favor of the brokerage firm.

3.Rogers v. Wright, No. S-15-0127, 2016 WL 280942 (Wyo. Jan. 22, 2016)

Licensee was not liable for statements made while the licensee was acting as an intermediary between the parties.

After discovering cracks in the walls and the foundation, leaks in the foundation, and improper grading on a recently purchased property, the purchaser sued the seller for breach of contract, negligence, intentional misrepresentation, and breach of warranty for failing to disclose those issues. In the claim for intentional misrepresentation, the purchaser argued that the seller could be liable for statements made by the licensee.

The court determined, however, that the licensee was in a nonagency relationship with the client and was serving as an intermediary. The licensee was not acting as seller’s agent or buyer’s agent, and this non-agency status was noted in the sales contract. There was no evidence that the licensee breached any statutory duties. The court affirmed summary judgment for the seller on the intentional misrepresentation claim.

4.RZI Properties, LLC v. Southern REO Assocs., LLC, No. A15A2090, 2016 WL 718441 (Ga. Ct. App. Feb. 24, 2016)

Brokerage firm could be held liable if its broker was responsible for late delivery of documents and information to the seller.

A prospective purchaser sued its brokerage firm after the seller rejected the purchaser’s offer. The purchaser claims the licensee, acting as transaction broker with limited statutory duties to the parties, caused late delivery of documents and failed to notify him of deadlines set by the seller. The trial court granted summary judgment for the firm. On appeal, the court reversed the summary judgment because there were questions of fact regarding whether the broker was at fault for untimely delivery of the information.

B. Statutes and Regulations[1]

Georgia

Georgia added a statute clarifying the permissible actions of a licensee that do not constitute the practice of law. A licensee may perform the following actions: provide information and advice regarding a listing, management, sale, purchase, exchange, renting, lease, option, or conveyance of real property; prepare special stipulations to forms prepared by an attorney; provide legal forms prepared by an attorney; and complete legal instruments prepared by an attorney for clients and customers.[2] The licensee may not close a real estate transaction or express or render a legal opinion regarding the status of title to property.

Georgia also amended its statute regarding escrow accounts to change the term “banks” to “financial institutions.” As amended, the statute also allows accounts other than bank checking accounts to be used for escrow accounts.[3]

Virginia

Virginia amended its statute regarding the establishment of an agency relationship. A written agreement between the licensee and a prospective buyer does not need to be executed before the licensee shows properties to the prospective buyer.[4]

Washington

An amended regulation in Washington modifies the storage options available to licensees for the storage of real estate records. Real estate records, including initial listing agreements, trust account records, negotiations, price reductions or changes in status, initial offers, counteroffers, electronic communications, and final disposition of the transaction, may be stored electronically or on remote devices if retrieval of the documents is immediate.[5]

C. Volume of Materials Retrieved

Agency issues were identified 18 times in 14 cases (see Table 1). Agency: Other was the most commonly raised issue, while Vicarious Liability and Breach of Fiduciary Duty issues were considered in many cases as well. Four Agency statutes and one regulation were retrieved this quarter.