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Real Estate Agent Liability for Ordinance and Zoning Issues

Type Matter:  Real Estate Agent Liability for Ordinance and Zoning Issues
Issue:  Can a real estate Agent be held liable for failing to disclose to Buyer a recent city ordinance limiting the number of registered sex offenders who can reside at a property?
Answer:  Maybe

Facts:  Buyer purchased a duplex and allegedly informed her Agent that she intended to use the property as temporary housing for “parolees.” Agent, who also represented Sellers, was aware that Sellers had used the property to house at least one “sex offender parolee” in each unit. Buyer never informed Agent that she, too, intended to specifically house “sex offender parolees” in the duplex. Buyer actually intended to house as many as six “sex offender parolees” in each unit. Agent and Buyer were unaware that local City ordinance was passed one year prior which specifically limited the number of “sex offender parolees” at any one unit in the City to no more than one. Third party neighbor claims he informed Agent of City ordinance prior to the close of escrow. After Buyer completed the purchase, she was informed by neighbor of the recent City ordinance. Buyer sued Seller and dual Agent claiming she was unable to run the business she intended from this property due to the undisclosed City ordinance.

Results:  Although an Agent has no duty to examine public records, a mediator felt that the Agent should have realized that where Seller had used the property to house at least a limited number of “sex offender parolees” and where Buyer advised she wanted to house “parolees”, Agent should have advised Buyer, in writing, that Buyer should undertake her own investigation to determine if the property was suitable for her intended use. Parties resolved this matter at mediation based partly on Agents failure to advise her client and partly on adverse testimony of third party neighbor.

Lesson:  When selling a property, be aware of the particular intentions and expectations of clients. Where there is a special intention or expectation, make sure the client has been properly advised to investigate whether that intention and/or expectation can be met. In addition, always do so in writing, as third party witnesses can later undermine Broker’s oral statements. If the disclosure is in writing, there can be no question it was provided.

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