Recently decided a case dealing with an alleged acreage shortage and
Addressed the duties of the seller and the real estate agents involved in
That transaction. (See Schmiedebusch v. Rako Realty, Inc., 2005-Ohio-4884.)
The case is insightful, as it illustrates the relatively minimal duties owed
By a seller and seller's agent to a buyer, yet the extremely high duties
Owed by a buyer's agent to a buyer.
Schmiedebusch dealt with a situation in which the buyer purchased a vacant
Lot in Delaware County on which he planned to build a home. After the buyer
Found the lot through an Internet search, he had his real estate agent
Contact the seller's agent. The seller's agent then faxed the plat and grade
Plan for the property and surrounding area to the buyer's agent. The buyer
Claimed that he followed his agent and the seller as they "walked off" the
Boundaries of the property during a physical inspection of the lot. At the
Closing, the buyer received a deed and signed a mortgage--both of which
Contained an accurate legal description for the property.
After the closing, the buyer claimed that he did not receive as much land as
He thought he had purchased. The land he claimed he thought he was
Purchasing actually encompassed two lots, but he only purchased one lot. He
Alleged that the "For Sale" sign was placed on the property in a way that
Led him to believe that both lots were one lot. He asserted that the seller
And real estate agents involved intentionally misrepresented information to
Him because any home built on the lot that he purchased would have to be
Built behind another house. He then brought suit against the seller,
Seller's' agent and his agent for fraudulent and negligent misrepresentation.
He also brought a claim against his agent for breach of fiduciary duty.
The trial judge dismissed all of the claims against all of the defendants.
However, the buyer appealed that decision to the Court of Appeals. The Court
Of Appeals agreed with the dismissal of the claims against the seller and
The seller's agent, but the Court of Appeals allowed the claims of breach of
Fiduciary duty and negligent misrepresentation to proceed against the
The Court first addressed the claims against the seller and seller's agent.
The Court of Appeals applied the doctrine of caveat emptor and found that
The buyer could not have justifiably relied on any representations of the
Seller or the seller's agent. The court noted that caveat emptor precludes
Recovery by a purchaser against a seller if: "(1) the defect or condition is
Open to observation or discoverable on reasonable inspection; (2) the
Purchaser had unimpeded opportunity to examine the property; and (3) the
Seller did not engage in affirmative misrepresentation or concealment so
Reprehensible in nature as to constitute fraud."
The Court observed that the plat provided accurate information about the
Lot, as did the information contained in the MLS listing. Moreover, the
Relevant closing documents also contained an accurate legal description.
Thus, the Court found that the seller and seller's agent owed no additional
Duties to the buyer in this situation.
The Court's view of the buyer's claims against his agent was much different.
The Court assessed the fraudulent misrepresentation claim against the
Buyer's' agent and found that the buyer was unable to establish that a
Fraudulent mis-representation was made by the buyer's agent. However, the
Court then closely analyzed the extremely high fiduciary duties owed by a
Buyer's' agent to a buyer. Significantly, the Court agreed with the buyer's
Argument that the buyer's agent "should have known the true dimensions of
The property involved" based upon "the increased standard of competency
Required of a real estate agent."
The buyer's agent asserted the doctrine of caveat emptor as one of his
Defenses. The Court shrugged off that defense, indicating that it, "does not
Apply when a real estate agent fails to disclose to his clients facts which
Were known or should have been known by him that were material to the
The Fifth District Court of Appeals issued a very pro-real estate agent
Decision several years ago, in which it determined that only one provision
Of Ohio's agency law provides a private right of action against a real
Estate agent. (See Roth v. Yonts, 1999 WL 668586.) Therefore, the Roth Court
Concluded that no private right of action exists based upon the other
Provisions of Ohio's agency law. Nevertheless, in the Schmiedebusch case,
The Court of Appeals closely analyzed the various statutory duties set forth
In Ohio's agency law and found that the buyer was entitled to pursue his
Breach of fiduciary duty claim against his agent.
Similarly, the Schmiedebusch Court found that the buyer only needed to show
That false information was provided to him and that his agent failed to
Exercise reasonable care or competence in obtaining or conveying that
information, in order to pursue a claim for negligent misrepresentation
against his agent. The Court of Appeals implied that it was relatively
simple for a buyer to pursue a negligent representation claim against a
buyer's agent, since a buyer's agent owes such a high standard of care to a
buyer. Thus, the Court of Appeals also allowed the buyer to continue to
pursue his negligent misrepresentation claim against his agent.
The Court of Appeals did not decide whether any duty was actually breached
in this case. The Court merely found that the dismissal of claims against
the buyer's agent was improper. Most importantly, the Court of Appeals
emphasized the extremely high duties owed by a real estate agent to the
client and indicated that when any such duty may have been breached, a trial
would have to be held to determine whether any duty was in fact breached.