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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May | June | 2015 Commercial Investment Real Estate L EG AL BRIE F S stokkete/Veer r Real estate agents and brokers often make disclosures without attributing information sources. In so doing, they become the source of the information. When the information is accurate, there is no problem. When the information is inaccurate, however, the agent or broker, as the source of the inaccurate statement, bears respon- sibility for the statement. been declared buildable by the investigat- ing licensed geologist. Report available for serious buyers." Unfortunately, it turned out that the parcel was not buildable. Between the time of the 1982 report ref- erenced in the MLS and the time of the 2006 statement in the MLS, the 1994 North- ridge earthquake had occurred. While pre- Northridge earthquake seismological regu- lations may have permitted the development of the parcel, post-Northridge earthquake seismological regulations did not. Unaware of this change in regulations and in reliance on the statement that the parcel was "build- able," the purchaser bought the property. T e purchaser thereaf er "began to try to develop the property," but "could not feasibly move forward with his plans for a commercial building on the property" and brought suit against, among others, the listing broker. T e court rejected the claims of the pur- chaser against the listing broker. It noted that, as the listing broker did not represent the purchaser, the listing broker did not owe the purchaser a f duciary duty. Instead, the listing broker simply owed the purchaser the general duty of "honesty, fairness, and full disclosure toward all parties" owed by agents and brokers throughout the country absent a f duciary relationship. T e court then found that the listing broker's statements complied with this standard. Although the property was not buildable, "seller's broker never said that it was." T e listing broker merely stated that the "parcel ... has been declared build- able by the investigating licensed geologist." T at statement was, in fact, true. T us, by providing the source of the infor- mation, the listing broker was found not to be liable even though he had provided material information that turned out not to be true. What If … To better appreciate the foregoing principle, as well as its limits, consider the following alternative scenarios. What if the listing broker, in reliance on the report of the licensed geologist, simply stated that the "parcel was buildable" instead of stating it had been "declared buildable by the investigating licensed geologist." Would the listing broker be liable? Yes. T e listing Going to the Source Minimize your liability by providing attributions. by Sean E. Ponist As discussed below, by attributing the source of the information, an agent or broker can avoid, or at least attempt to avoid, liabil- ity for any unintentional errors in informa- tion passed along. Identifying the Source In a recent California appellate decision, Saf e v. Schmeling (2014) 224 Cal.App.4th 18 563, the court found that the listing broker was not liable even though he disclosed erroneous information upon which the buyer had relied. In that decision, the list- ing broker made the following statement on a multiple listing service in marketing his client's property: "T is parcel is in an earthquake study zone but has had a Fault Hazard Investigation completed and has