Suing The Broker: A Tougher “Sell” Than You Think
When a real estate transaction goes very wrong, buyers often look for someone to blame. Sometimes the seller is the object of the buyers’ wrath. In other instances it’s their home inspector. Still other times it’s the buyers’ attorney.
But the greatest anger is usually reserved for the broke, the party against whom the buyer is likely to find the hardest road to a finding of legal responsibility.
Why can it be so hard to hold brokers accountable for defects in a house, or misrepresentations concerning zoning or other characteristics of a property? Because, in a nutshell, there is a wide difference between what most of us think a broker is obligated to do in a transaction, and what the law actually requires.
Most clients who contact me with these issues think that a broker has an affirmative obligation to investigate various aspects of a property and then report his or her findings to a prospective buyer. Those same clients are quite surprised when I tell them that the law imposes no such obligation.
A broker IS obligated to disclose to a prospective buyer any information that he/she knows about, and that someone in the broker’s position believes would affect that prospective buyer’s purchasing decision. So, for instance, if a broker knows that the abutting property (now a house) has been rezoned for commercial use, the broker must disclose that fact. There is a distinction, however, between knowing that fact and not disclosing it (a real problem for the broker), and having to learn of that fact to begin with (something the broker is not obligated to do).
Of course, there are certain things that brokers know of by virtue of the fact that they have learned about it in their licensure training. For example, in Massachusetts, a house only is considered to have a bedroom if it has a closet. If a broker markets a property as a three-bedroom home but one of the bedrooms lacks a closet, the broker is probably liable for misrepresentation because brokers know through their training what makes a room a legal bedroom. Other knowledge, however, is not so easy to attribute to a broker. If a contractor installed something that turned out not to be in compliance with the building code, the broker would not necessarily know that fact , as brokers typically do not review files for the property at the building department.
Brokers are subject to Chapter 93A, the Massachusetts Consumer Protection Act, which provides for up to three times damages plus attorney’s fees if a broker is found to have engaged in “unfair” or “deceptive” acts, such as non-disclosure of material information they knew about a property. But the most difficult aspect of any such case is proving that the broker knew the information to begin with.