A case that was recently decided by the New York County, NY, Supreme Court (trial court of NY), entitled Katehis v. Sovereign Associates, Inc., et al., presents an interesting twist to the application of the Code of Ethics and Standards of Practice of the National Association of Realtors (the "Code of Ethics"). The plaintiff retained the services of the defendants to find a rental unit for her in Manhattan. An apartment was found. The plaintiff made an inspection of the unit during the day and decided that she would rent the apartment. The plaintiff did inquire of the defendants as to the presence of rodents and other types of pests. She was told by the defendants that the building provided extermination services but that they were talking about a building in NYC. The Plaintiff signed a Brokerage Commission Agreement, agreeing to pay the defendants a commission for finding a rental unit for her, and in fact she paid the commission due.
Two days after the plaintiff took occupancy of the apartment, a bat flew over her head. The superintendent of the building went to the apartment and trapped the bat and removed it. A few days 
later the plaintiff was attacked by a bat and suffered injuries. She sued the defendants for a number of things, including fraud, misrepresentation, and breach of contract.
The defendants argued that the Brokerage Commission Agreement represented the entire agreement between the parties as the contract contained a merger clause. A merger clause that states that the written contract represents the entire agreement between the parties and if a representation or other term is not in the written contract, then it is not part of the agreement between the parties.
The plaintiff argued that the court should not dismiss her action for breach of contract because the defendants breached the Code of Ethics by not protecting and promoting the interests of their client, to-wit: the plaintiff. The plaintiff stated that the "client's interests" include finding a habitable apartment and that the defendants failed to find a habitable apartment and thereby breach an implied warranty of habitability that was inherently implied into the Brokerage Commission Agreement pursuant to the Code of Ethics.
I have seen implied warranties of habitability arise under statutory new home warranties and there are implied warranties under the Uniform Commercial Code (which does not apply to residential leasing arrangements), but I have never heard of an implied warranty arising under a code of ethics of any sort. I think the plaintiff was really stretching her arguement in this case. Following her logic, an attorney could be found to be making implied warranties under applicable rules of professional coduct and any other professional that is bound by any kind of ethics code might likewise be found to be making implied warranties regarding their services. Fortunately, the court did not buy the plaintiff's arguement.
The foregoing is not in any manner whatsoever to be construed as legal advice or as a legal opinion. If you have questions regarding real estate transactions seek the advice of a competent real estate attorney in the area.
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