Broker and Salesperson Liability

Apr 21, 2017

The Department of State is the Agency that governs Real Estate Licensees. As such, it has regulatory powers over Brokers and Salespersons. Licensees, however, are also finding that members of the public are trying to make them responsible in civil actions for duties and obligations they have allegedly breached, while federal, state and local governments are holding them accountable for behavior that could subject them to fines and even criminal prosecution! Everywhere Licensees look, they are in danger! Following are several Helpline questions that demonstrate the current threatening trend.

Q. I am a real estate salesperson and took a potential buyer to a home where she fell and broker her arm. The injured party wants to sue everyone. The seller is insisting I am responsible for the injury, not the seller, since I was showing the house. According to the seller, my having the listing has made me liable. Is this true?

A. Absolutely not, unless you somehow caused the harm. The seller is liable and should inform his insurance carrier about the claim. You might want to point the seller and his lawyer to a 2006 2d Department case (Schwalb v. Kulaski, 814 NYS2d 696) wherein the Court found that the broker was not liable in a similar case where the broker merely showed the property and did not own, control, occupy, maintain or manage the property!

Q. The seller told me he had a rental permit for the property I listed, but did not show it to me, although I asked to see it. Now the tenant is in and it appears there is no permit. The tenant wants her money for the fee back from me and is threatening to report me to the Department of State. What should I do?

A. Give back the money! What you should have done is check with the town to make sure there was a permit on the record. Although the tenant should not be threatening you with the possibility of a complaint to the DOS, you should be aware that the DOS would look upon your failure to have made diligent efforts to confirm the existence of the permit evidence of incompetent and perhaps untrustworthy behavior. You could be fined more than the return of the fee would cost. Your return of the fee, however, will not guarantee that the tenant will not complain to the DOS anyway!

Q. I am a buyer's agent and brought about a transaction with my client for a property listed by another office. After the closing, the buyer decided to sue the seller, his lawyer, the listing agent and me because the house he bought had no Certificate of Occupancy for a finished basement. I think the lawyer or the listing agent should be responsible. I only gave the buyer the information I was given. Is this fair?

A. Life isn't fair! This, however may well be considered reasonable by a Court of competent jurisdiction. The claim will be that the seller should not have offered a property that did not conform with local law to an unsuspecting buyer, the listing agent had a duty to discover and disclose material information regarding the property he was marketing, and you, the agent representing the buyer, had a further duty to confirm the information given by the seller and listing broker, since you were working for the buyer and such inquiry would be part and parcel of your duty of reasonable care to your client. The lawyer's liability lies in the fact that he did not ask the buyer if there was a finished basement, since he probably never saw the house. If the buyer were to complain about the transaction to the Department of State, you and the listing agent could be found incompetent and untrustworthy! Next time, check!

In each situation above, the broker would be vicariously liable for the actions of the agents!

Be careful! You have much to lose!