Reliance by Third Party on Broker’s Statements

Type Matter:  Reliance by Third Party on Broker’s Statements
Issue:  Can a Broker create duties to third parties by making statements outside the scope of his/her agency?
Answer:  Probably

Facts:  Property was foreclosed upon while Tenant was residing in Property. Bank hired Broker to list and sell Property. Broker contacted Tenant and informed him that Sheriff was arriving on a certain day to evict him. Tenant allegedly contacted Broker stating that he would leave but needed to leave his stuff at the Property. Broker allegedly allowed this and stated that he must remove all of his belongings prior to Date B. On Date A (prior to Date B), a neighbor noticed burglars in the Property and phoned the police, at which point the burglars fled. The police phoned Broker, and Broker phoned Tenant. Most of Tenant’s belongings were stolen. Tenant allegedly requested permission to remain on the Property overnight, so that he could protect the remainder of his belongings, until the next morning when he would be able to move them. Broker refused to grant such permission, and allegedly stated that he would secure the premises. Tenant left and Broker locked the door but did not board up the window that was used as an entryway by the burglars. The next day, Broker returned to the Property, to grant Tenant entrance to remove the remainder of his belongings, and discovered that the burglars had returned and stolen/destroyed the remainder of Tenant’s belongings. The police were phoned and the burglars were arrested. Tenant sued Broker based on the alleged statements and assurances that Tenant’s belongings could be stored at the Property.

Results:  After having two Demurrers sustained with leave to amend, the case was settled for a nominal amount the day before the third Demurrer was set to be heard. While the matter was not determined by the Court, statements from the Judge were interesting. He stated that while there may not be a duty from a Broker to a Seller or a Tenant as it relates to theft, once the Broker had made affirmative representations about securing the property, those representations may have created duties to Tenant.

Lesson:  Brokers should be careful not to make statements outside the scope of their standard of care services. Additionally, any statement should be backed up in writing. In this case, the Broker had no authority to allow Tenant to leave their belongings in the Property. When asked by the Tenant, Broker should have asked the Bank, and if the Bank gave permission, Broker should have advised Tenant, but also state that they did so at Tenant’s own peril. All of the foregoing should have been in writing. Had Broker done so, litigation may have been avoided or minimized.

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