Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
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LEGAL BRIEFS Use a Lifeline m 18 September | October | 2012 risk in an uncertain market. by Kevin Kerridge Mired in a diffi cult market, real estate agents, brokers, and property managers are encountering adversarial situations and hostile clients. When deals don't work out as hoped, buyers and sellers look for someone to blame. Increasingly, they are fi nding fault with their real estate professionals and slapping them with lawsuits. When that happens, real estate profession- Problem Issues als need the protection of a comprehensive insurance program. While most large fi rms require their agents, brokers, and managers to have insurance, many independents and small-agency personnel are uninsured. T at's a particular problem, because small operators are especially vulnerable to the fi nancial and professional repercussions of litigation. The troubled real estate market isn't expected to improve substantially anytime soon. As a result, there's a greater likelihood of disputes over property condition disclo- sures and commission payments, according to the National Association of Realtors' 2011 Legal Scan, a biennial study of legal issues facing real estate professionals. T e huge amount of real estate-owned prop- erty in the hands of banks and other lenders is also a potential stumbling block. Nearly 60 percent of real estate professionals surveyed say they believe REO-related disputes will increase over the next two years, and 76 percent believe it will be among the top three issues they will face, the survey found. T e study polled real estate agents, brokers, attorneys, and educators. Clearly, real estate profession- als at all sizes and types of businesses face multiple risks. Among the scenarios: Defects. Aſt er closing a sale, a new property owner finds defects with the property. T e new owner sues the real estate agent for the diminished value of the property, alleging the agent did not disclose the defects. Negligence . Property values continue to fl uctuate, which leads to cases of "buyer's remorse." Following the close of the sale, a client may blame the agent for what the client perceives as overpayment for the property. T e agent is then faced with claims of supposed negligence in researching the property's value. Unlawful Discrimination. If an apart- ment building manager denies a potential tenant a lease, the manager could face a claim that the applicant was denied a lease because of race, religion, or gender. Bodily Injury. If a potential buyer or visi- tor falls and is injured in the agent's offi ce or property, a real estate agent could face a bodily injury lawsuit. Agents, brokers, and property managers need to protect themselves with insurance, which can be diffi cult, particularly now, when budgets are limited. However, some insurers are off ering aff ordable policies that cover the special risks real estate professionals face. Even if a covered claim is groundless, as many are, the insurer will still provide a Commercial Investment Real Estate Smaller companies need to manage Philip and Karen Smith/Getty Images