Liability When Realtors Make Errors or Omissions

If you are a realtor, you probably don’t give much thought to being sued. Realtors aren’t on the top of people’s minds when it comes to litigation-risky professions.

And yet, realtors are entrusted with deals that are often worth as much or more than the typical daily business contract deal. When there’s that much money at stake, and things go wrong, you can bet that lawsuits are right around the corner.

Drafting Contracts

One area where realtors get in trouble is in the area of contract drafting. Yes, many real estate contracts are forms that are approved by the Florida Bar or other realtor groups, and thus, are generally properly and thoroughly drafted.

But complex real estate deals can be akin to complex commercial or business contracts. That’s where realtors often get in trouble, drafting side contracts and addendums and occupancy agreements and agreements to hold and distribute escrow money and any number of other types of contracts.

What many realtors don’t think about is that they are actually bordering on the illegal practice of law, as drafting a business or real estate agreement is not something realtors are legally allowed to or qualified to do.

When things go wrong with a contract that a realtor drafted, you can bet that the party represented by the realtor will look to the realtor for liability.

Disclosing Negative Information

A realtor generally has the duty to disclose information that the realtor knows, which would affect the client’s decision to purchase property, or which would influence the buyer’s decision to buy.

But disclosing that information can kill a real estate deal and realtors make their money closing property. That creates a conflict of interest, and one that many realtors overlook. They often would prefer to leave out unattractive details about a deal or about property so as not to risk the contract not closing.

Fiduciary Duties

Many realtors don’t realize that they are fiduciaries to their clients; they owe their clients duties of diligence, competency, loyalty, and to put their client’s interest first and foremost.

But many succumb to temptation, engaging in self dealing. For example, a realtor who sees a fantastic real estate deal, may be tempted to discourage the client from buying the property, thus allowing the realtor to purchase the property. Or, the realtor may have some relationship with the other side of the transaction, and thus, may have a conflict of interest making the reactor unable to truly put his client first.

Negligence and Contract Claims

Remember that many claims for negligence against reactors will have shorter time limits—often as short as two years. If the lawsuit is based on a contract that time limit may be extended, to 4 years, but a contractual claim will usually have damages that are more limited than a negligence claim.

If you have litigation related to a real estate issue, we can help. Call the West Palm Beach commercial litigation lawyers at Pike & Lustig today and let us help you with your business law questions.

Source:

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