LEGAL LIABILITY UPDATE. Every year, our legal liability update provides a separate article which discusses recent

Transcription

1 LEGALLIABILITYUPDATE I. INTRODUCTION Everyyear,ourlegalliabilityupdateprovidesaseparatearticlewhichdiscussesrecent casesdecidedallaroundthecountryinanefforttogivemichiganrealtors7asenseof relevant trends in legal liability. While these cases are obviously not decided based on Michiganlaw,adiscussionofthecasesbelowcanhelpprovideaframeworkforunderstanding theorientationofliabilitylawnowandintothefuture.pleasenotethatthisarticleshouldnot betakentobeacomprehensivereview,rather,thefollowingcaseshavebeenselectedforthe lessonstheyprovide. AsanyREALTOR7canattest,buyingahomecanbeanintenselyemotionalexperience. AstheJapaneseproverbgoes, amaninlovemistakesapimpleforadimple, anditisnot uncommonforbuyers,oftenresemblinglove struckteenagers,tolookcloselyatwhatthey haveacquiredonlyaftertheheadyemotionssubsideandthedealisdone.buyers remorse sometimesleadstolitigation,whereagentsandbrokersareblamedfornotdisclosingdefects, makingmistakenrepresentationsaboutthepropertyandsoforth.thisyear slegalupdate discussesanumberofrecentlawsuitsbroughtbybuyersagainstagentsafterthecloseofsale. II. DISCUSSION InPollmanvSwan,2010WL (GAApp2010),thePollmanswereinthemarket foranewlybuiltcondominiumunitinsavannah,georgia.ayearafterclosingontheunit,the Pollmans sued the builder seller s real estate agent, alleging that the agent had actively concealedadefectivebaywindowandhvacandthermostatproblems by the Michigan Association of REALTORS 2

2 BeforethePollmansclosedonthecondominiumunit,theyhiredahomeinspectorto conductaninspectionoftheunit.theinspectorspecificallypointedouttothepollmansthat there were problems with the bay window and recommended having the flooring and supportsforthebaywindowevaluatedbyastructuralengineer.healsonoticedthatcertain repairshadalreadybeenmadetothewindowandrecommendedfurtherinvestigationofthe issue.likewise,theinspectorinformedthepollmansthatthehvacsystemwasnotfully installedoroperationalatthetimeoftheinspectionandrecommendedthatthesystembe inspectedonceitwascomplete. The Pollmans, however, never followed through with their inspector s recommendations, never solicited the opinion of a structural engineer nor did any other investigationregardingthewindow.attheclosing,thepollmansacknowledgedthatthehvac system,thegaragedoorandthestovewerenotinstalledandthattheywereawarethatthere weresomeissueswiththebaywindow.insteadofpostponingtheclosing,andinsteadof requiringthatfundsbeplacedinescrowtoensurecompletionoftheunfinisheditems,the Pollmansnotonlyclosedthesale,butalsosignedastatementagreeingthatthe conditionsof thesalescontractweresatisfactorilymet. Georgialaw,echoingacommonsenseprincipleappliedinmanystates,holdsthata person cannotbepermittedtoclaimthathehasbeendeceivedbyfalserepresentationsabout whichhecouldhavelearnedthetruth andcouldtherebyhaveavoidedthedamagesheclaims. Thecourtheldthat,becausetheinspectionhadputthePollmansonsomedegreeofnotice 2010 by the Michigan Association of REALTORS 3

3 regardingpotentialproblemsrelatedtothebaywindowandthehvacsystem,theirdecision tocloseonthesalewithoutconductinganysortoffollow upinspectionwasafailureofdue diligencethatpreventedthemfromrecoveringagainsttheagent.thecourtstated: Noticesufficienttoexciteattentionandputapartyoninquiry shallbenoticeofeverythingtowhichitisafterwardsfoundsuch aninquirymighthaveled.ignoranceofafact,duetonegligence, shallbeequivalentknowledge,infixingtherightsoftheparties. Assuch,thecourtdeterminedthatitwasfairtotreatthebuyers whoshouldhavetakensteps todiscoverthespecificdefects asiftheyhadactualknowledgeofthedefects.becausethe buyersfailedtoexercisereasonablediligenceininvestigatingsomethingthattheyhadsome degreeofnoticefor,thecourtdismissedthecaseagainsttheseller sagent. In Colasacco v Robert E. Lawrence Real Estate, 890 NYS 2d 114 (2009), an agent representing buyers of property on which they later built a home was held not liable for accidentalmisrepresentationsregardingtheboundariesoftheproperty.inoctoberof2002, thecolasaccosemployedchristopherdicorratoastheirrealestateagent.dicorratometwith thecolasaccosandshowedthemaparcelofvacantpropertythatwasforsaleinstamford, New York. In showing the property, DiCorrato walked the property with his clients and showedthemtheboundarylinesandmarkers.thecolasaccospurchasedthepropertyand builtahomeonitshortlythereafter.insodoing,thecolasaccosclaimedtohavereliedonthe boundarylinesthatdicorratohadshownthemwhentheyhadwalkedthepropertytogether priortoitspurchase by the Michigan Association of REALTORS 4

4 In2006,aftertheColasaccoshadputtheirhouseonthemarket,theydiscoveredthat theyhadbuiltaportionoftheirhomeontheirneighbors property.thecolasaccosthen purchasedaportionoftheirneighbors propertyandbroughtalawsuitagainsttheiragent, DiCorrato.ThelawsuitsoughttorecoverfromtheiragenttheamountthattheColasaccoshad paidtotheirneighborsfortheland,basedonatheorythattheagentwastoblameforthe misplacedhomebecausehehadmadeamistakeinshowingthemthepropertyboundaries. The New York court dismissed the buyers claims of negligent misrepresentation againsttheiragent.acentralelementofsuchmisrepresentationclaimsisthat,evenifthe agent srepresentationwasfalse,andevenifitwasnegligenttomaketherepresentation,such amisrepresentationonlygivesrisetoalegitimateclaimwhereitwasreasonabletohaverelied upontherepresentation.here,thecourtnotedthattherewasnoreasontobelievethatthe dimensionsandboundarylinesofthepropertywerewithintheexclusiveknowledgeofthe agentandthatthebuyerscouldhavesimplylookeduptheboundariesbyothermeans.the courtheldthat: theplaintiffs supposedrelianceupondicorrato sallegedmisrepresentations concerningthelocationoftheproperty sboundarylineswasunreasonableasamatteroflaw. WhileREALTORS7shouldobviouslybecarefulaboutmakingspecificfactualstatements aboutapropertywithoutasufficientbasis(i.e., thepropertylineisrighthere ),courtswill generallyholdagentsliableforsucherroneousstatementsonlywhereitcandeterminethatit wasreasonableforapersontoactinrelianceonthosestatements. Ontheotherhand,however,courtsoftendofinditreasonableforapurchasertorelyon 2010 by the Michigan Association of REALTORS 5

5 the specific representations of an agent. In Bowman v Presley, 212 P3d 1210(2009), an Oklahomacourtconsideredthequestioninthecontextofanagent sstatementthatahome measuredacertainnumberofsquarefeet.there,thebowmanspurchasedahomefromthe Presleys whowererepresentedbythemotheroftheseller,lindapresley for$145,000. Thesellers agenthadrepresentedtothebuyersthatthehousecontained2890squarefeet. TheBowmans,whoatthetimeofthesalehadbeenlivinginahomemeasuring1398square feet,hadbeenspurredtopurchaseanewhomeprimarilybyadesiretoobtainmoreliving space. As in the previously discussed cases, the buyers made no effort to investigate or confirmtherepresentationsmadebytheagentregardingthesquarefootageofthehome. They closed on the home and moved in, believing the home to be 2890 square feet. The Bowmans satisfactionwiththeirnewly acquiredhomeendedabruptlywhen,ashorttime aftertheclosing,theyreceivedacopyofthemortgageappraisal.thisappraisallistedthe actualsizeofthehousenotas2890squarefeet,butratheras2187squarefeet,adifferenceof 703squarefeet(orroughly25%smaller)fromwhattheagenthadrepresentedtothemduring thesaleofthehome.notonlythat,butafterreceivingthisappraisal,theappraisersgavethe buyersanappraisaltheyhadpreparedfiveyearsearlierwhenthepresleyshadoriginally purchasedthehome.thatearlierappraisalalsoshowedthehomeascontaining2187square feet.whenconfrontedwiththeseconflictingappraisals,theagentindicatedthatthe2890 figureshehadusedwasthesquarefootagelistingonrecordwiththecountyassessor soffice by the Michigan Association of REALTORS 6

6 LEGALLIABILITYUPDATE I. INTRODUCTION Everyyear,ourlegalliabilityupdateprovidesaseparatearticlewhichdiscussesrecent casesdecidedallaroundthecountryinanefforttogivemichiganrealtors7asenseof relevant trends in legal liability. While these cases are obviously not decided based on Michiganlaw,adiscussionofthecasesbelowcanhelpprovideaframeworkforunderstanding theorientationofliabilitylawnowandintothefuture.pleasenotethatthisarticleshouldnot betakentobeacomprehensivereview,rather,thefollowingcaseshavebeenselectedforthe lessonstheyprovide. AsanyREALTOR7canattest,buyingahomecanbeanintenselyemotionalexperience. AstheJapaneseproverbgoes, amaninlovemistakesapimpleforadimple, anditisnot uncommonforbuyers,oftenresemblinglove struckteenagers,tolookcloselyatwhatthey haveacquiredonlyaftertheheadyemotionssubsideandthedealisdone.buyers remorse sometimesleadstolitigation,whereagentsandbrokersareblamedfornotdisclosingdefects, makingmistakenrepresentationsaboutthepropertyandsoforth.thisyear slegalupdate discussesanumberofrecentlawsuitsbroughtbybuyersagainstagentsafterthecloseofsale. II. DISCUSSION InPollmanvSwan,2010WL (GAApp2010),thePollmanswereinthemarket foranewlybuiltcondominiumunitinsavannah,georgia.ayearafterclosingontheunit,the Pollmans sued the builder seller s real estate agent, alleging that the agent had actively concealedadefectivebaywindowandhvacandthermostatproblems by the Michigan Association of REALTORS 2

7 BeforethePollmansclosedonthecondominiumunit,theyhiredahomeinspectorto conductaninspectionoftheunit.theinspectorspecificallypointedouttothepollmansthat there were problems with the bay window and recommended having the flooring and supportsforthebaywindowevaluatedbyastructuralengineer.healsonoticedthatcertain repairshadalreadybeenmadetothewindowandrecommendedfurtherinvestigationofthe issue.likewise,theinspectorinformedthepollmansthatthehvacsystemwasnotfully installedoroperationalatthetimeoftheinspectionandrecommendedthatthesystembe inspectedonceitwascomplete. The Pollmans, however, never followed through with their inspector s recommendations, never solicited the opinion of a structural engineer nor did any other investigationregardingthewindow.attheclosing,thepollmansacknowledgedthatthehvac system,thegaragedoorandthestovewerenotinstalledandthattheywereawarethatthere weresomeissueswiththebaywindow.insteadofpostponingtheclosing,andinsteadof requiringthatfundsbeplacedinescrowtoensurecompletionoftheunfinisheditems,the Pollmansnotonlyclosedthesale,butalsosignedastatementagreeingthatthe conditionsof thesalescontractweresatisfactorilymet. Georgialaw,echoingacommonsenseprincipleappliedinmanystates,holdsthata person cannotbepermittedtoclaimthathehasbeendeceivedbyfalserepresentationsabout whichhecouldhavelearnedthetruth andcouldtherebyhaveavoidedthedamagesheclaims. Thecourtheldthat,becausetheinspectionhadputthePollmansonsomedegreeofnotice 2010 by the Michigan Association of REALTORS 3

8 regardingpotentialproblemsrelatedtothebaywindowandthehvacsystem,theirdecision tocloseonthesalewithoutconductinganysortoffollow upinspectionwasafailureofdue diligencethatpreventedthemfromrecoveringagainsttheagent.thecourtstated: Noticesufficienttoexciteattentionandputapartyoninquiry shallbenoticeofeverythingtowhichitisafterwardsfoundsuch aninquirymighthaveled.ignoranceofafact,duetonegligence, shallbeequivalentknowledge,infixingtherightsoftheparties. Assuch,thecourtdeterminedthatitwasfairtotreatthebuyers whoshouldhavetakensteps todiscoverthespecificdefects asiftheyhadactualknowledgeofthedefects.becausethe buyersfailedtoexercisereasonablediligenceininvestigatingsomethingthattheyhadsome degreeofnoticefor,thecourtdismissedthecaseagainsttheseller sagent. In Colasacco v Robert E. Lawrence Real Estate, 890 NYS 2d 114 (2009), an agent representing buyers of property on which they later built a home was held not liable for accidentalmisrepresentationsregardingtheboundariesoftheproperty.inoctoberof2002, thecolasaccosemployedchristopherdicorratoastheirrealestateagent.dicorratometwith thecolasaccosandshowedthemaparcelofvacantpropertythatwasforsaleinstamford, New York. In showing the property, DiCorrato walked the property with his clients and showedthemtheboundarylinesandmarkers.thecolasaccospurchasedthepropertyand builtahomeonitshortlythereafter.insodoing,thecolasaccosclaimedtohavereliedonthe boundarylinesthatdicorratohadshownthemwhentheyhadwalkedthepropertytogether priortoitspurchase by the Michigan Association of REALTORS 4

9 In2006,aftertheColasaccoshadputtheirhouseonthemarket,theydiscoveredthat theyhadbuiltaportionoftheirhomeontheirneighbors property.thecolasaccosthen purchasedaportionoftheirneighbors propertyandbroughtalawsuitagainsttheiragent, DiCorrato.ThelawsuitsoughttorecoverfromtheiragenttheamountthattheColasaccoshad paidtotheirneighborsfortheland,basedonatheorythattheagentwastoblameforthe misplacedhomebecausehehadmadeamistakeinshowingthemthepropertyboundaries. The New York court dismissed the buyers claims of negligent misrepresentation againsttheiragent.acentralelementofsuchmisrepresentationclaimsisthat,evenifthe agent srepresentationwasfalse,andevenifitwasnegligenttomaketherepresentation,such amisrepresentationonlygivesrisetoalegitimateclaimwhereitwasreasonabletohaverelied upontherepresentation.here,thecourtnotedthattherewasnoreasontobelievethatthe dimensionsandboundarylinesofthepropertywerewithintheexclusiveknowledgeofthe agentandthatthebuyerscouldhavesimplylookeduptheboundariesbyothermeans.the courtheldthat: theplaintiffs supposedrelianceupondicorrato sallegedmisrepresentations concerningthelocationoftheproperty sboundarylineswasunreasonableasamatteroflaw. WhileREALTORS7shouldobviouslybecarefulaboutmakingspecificfactualstatements aboutapropertywithoutasufficientbasis(i.e., thepropertylineisrighthere ),courtswill generallyholdagentsliableforsucherroneousstatementsonlywhereitcandeterminethatit wasreasonableforapersontoactinrelianceonthosestatements. Ontheotherhand,however,courtsoftendofinditreasonableforapurchasertorelyon 2010 by the Michigan Association of REALTORS 5