Listing Agents’ Reliance on Information Provided by Seller

Case Study:

This week we continue with a series of emails that will continue over the next several weeks where we will analyze Louisiana Court cases dealing with the duties of real estate agents and how agents breached their duties in some of those cases.

Hopefully, the readers of this email will learn more about what duties are placed on Louisiana real estate agents and how not to breach those duties.

This week, we will discuss below a Louisiana 5th Circuit Court of Appeals case dealing with an agents’ reliance on information provided to her by her client.

Merlin vs. Fuselier Construction Inc., et al, 789 So.2d 710 (La. App. 5 Cir, May 30, 2001)

Sellers utilized the services of a real estate agent to list their property.  When sellers met with their real estate agent, sellers advised their real estate agent that on a couple of occasions, a strong wind had blown off some roof shingles, but the contractor fixed them. The real estate agent was not told that the shingles were a serious and continuing problem.  Additionally, the real estate agent was not informed of any roof leaks.

Based on these assertions, that there was no current leaking and that the shingles were satisfactorily fixed, the sellers’ real estate agent determined that the roof was not an ongoing problem and advised sellers that they need not disclose the fact that the roof had been fixed.

In 1997, Dr. and Mrs. Merlin purchased the  home from sellers.  Prior to closing, buyers inspected the property twice and did not see anything wrong with the property.  Additionally, the inspector’s report did not reveal a defective roof.

After moving into the home a neighbor advised buyers that their roof had visibly defective shingles.  Experts examined the roof and confirmed that the roof was defective.  Buyers sued sellers for the defective roof, alleging sellers knew or should have known of the defect prior to sale.

Sellers filed a third party demand against their real estate agent alleging negligent misrepresentation.

At trial, buyers testified that prior to the sale they asked if there had been roof leaks and sellers told them “no.” After they moved in, an electrician showed buyers a leak mark that had been painted over.

Seller testified that in the two and a half years owning the home, he had the roof repaired three times. Because the roof had been repaired, he did not consider the roof to be an existing problem. He knew there had been a leak in the foyer, but he was told that the leak was caused by a flash pan that had been fixed.

The Trial court rendered judgment in favor of plaintiffs and against sellers. The trial court further found the real estate agent did not breach a duty owed and dismissed the real estate agent from the lawsuit.

The Louisiana 5th Circuit Court of Appeals upheld the ruling of the trial court regarding the real estate agent’s dismissal.

According to the Court of Appeals, a real estate agent owes a specific duty to communicate accurate information to the seller and the purchaser and may be held liable for negligent misrepresentation.  Since the sellers in this case:

  1. told their real estate agent that the shingles had only blown off on a couple of occasions;
  2. told their real estate agent that the shingles were satisfactorily fixed; and
  3. did not report any roof leaks,

 

the real estate agent did not commit negligent misrepresentation when she told sellers they did not need to disclose prior roof repair, because the roof was not an ongoing problem.

A quick comment about this case:

Although the Court held the seller’s agent was correct in her advice to sellers to not disclose prior roof repair, please see the “PROPERTY DISCLOSURE DOCUMENT FOR RESIDENTIAL REAL ESTATE” promulgated by the Louisiana Real Estate Commission, Section 6 entitled, “Miscellaneous” wherein the following questions are asked:

(31) Has there been property damage related to the land or the improvements thereon, including, but not limited to, fire, windstorm, flood, hail, lightning, or other property damage?

(a) If yes, were all related property damages, defects, and/or conditions repaired?

 

It is important that listing agents stress to their clients the importance of sellers truthfully completing the Property Disclosure document.  If an agent knows of prior property damage, then that property damage (and subsequent repair work) needs to be disclosed.

I think the distinguishing factor between the case noted above and the Property Disclosure document is the information provided by sellers in the case above did not seem to indicate any prior property damage.  However, when in doubt as to whether something should be disclosed, better to err on the side of disclosing the possible problem/defect/damage rather than not disclosing the possible problem/defect/damage.

For any questions concerning this email, please contact me at rye@tutentitle.com.

H.L. “Rye” Tuten, III, is a Title Attorney/Real Estate Closing Attorney and Owner of Tuten Title & Escrow, LLC. Formerly assigned by RICE Insurance to defend real estate agents throughout Acadiana, much of his more than nine years’ litigation experience is with real estate concerns.

The information contained herein is simply for informational purposes only and not intended to provide legal advice or create an attorney-client relationship.