Agent Liability and Indemnification – Lack of Knowledge on City Penalties

Type Matter:  Real Estate Agent Liability and Indemnification
Issue:  Can a real estate Agent be held liable for lack of knowledge and failure to disclose city or county enforced penalties pertinent to a listed property?
Answer:  No

Facts:  A Buyer purchased certain income producing property, only to find out several months after close that the city/county had placed the property into a program (REAP), penalizing the property owner by assessing fines and collecting rents until certain repairs and maintenance were performed. The Buyer brought suit against the listing real estate Broker for failure to disclose this material information.

Results:  Counsel for the listing real estate Broker convinced both counsel for the plaintiff and the cross-defendant title company that the Broker would have no way of knowing the property had been placed into the program without having been advised of this information by either the Seller or the title report, or both. The lack of disclosure by the Seller combined with the lack of information contained in the title report was enough to obtain a dismissal on behalf of the Broker. Counsel for the defendant real estate professional properly tendered the defense of the claim to the title company based on their failure to note this material information in the title report.

Lesson:  Counsel and client should always look to alternate sources of defense when considering strategy on how best to respond to a complaint. In some instances alternate insurance policies may cover the defense indemnification of a claim or it in this instance, tendering the defense to a title company resulted in a dismissal for the Broker.

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