Investigate, Investigate, Investigate

By
Real Estate Agent with Keller Williams Realty - Topsfield, MA 92593-B

I want to share this article from the Bay State Realtor® written by Stephen M. Perry ESQ,. It is always good to be reminded to think before we open our mouths or rush to answer. Also, we as Realtors®, need to perform our own due diligence on any seller property we represent or property we are showing to our buyer client. We should not solely rely on information we receive from a seller, buyer or another Realtor®. In MA we want to avoid being the recipient of a consumer complaint via a Consumer Protection Chapter 93A demand letter (Unfair or Deceptive Practices). Most States have a Consumer Complaint Division within the Attorney General's Office.

https://www.mass.gov/service-details/the-massachusetts-consumer-protection-law 

Careful What You Say

It’s an agent’s worst nightmare. You’ve procured the listing, successfully executed your marketing plan, and closed on the sale to a demanding buyer. And then, months or even years later, you find out that in some important respect the property was allegedly not as advertised. You learn of this in the most unpleasant way imaginable, by receiving a Chapter 93A letter from the buyer’s attorney demanding extortionate amounts of money. Your brokerage firm receives an identical Chapter 93A letter.

As every real estate licensee is taught, M.G.L. c. 93A, Section 9, permits a consumer to recover damages and attorneys’ fees for harm caused by “unfair or deceptive conduct” perpetrated by a business, including a real estate agent. Before going to court, the aggrieved individual must make a written demand for relief that identifies the allegedly unfair or deceptive conduct and specifies the damages.

The recipient of the letter has thirty days to make a reasonable offer of settlement. The failure to do so when the claim has merit may lead to an award of treble damages and payment of the claimants’ attorneys’ fees. It seems to be a longstanding tradition among attorneys to make these c. 93A demand letters as obnoxious as possible. The letters may embellish or distort the facts, mischaracterize good faith conduct as deliberate fraud, and inflate the claimed damages.

While many chapter 93A claims can be successfully defended, it is best to avoid receiving such a demand letter in the first place. Even if a claim lacks merit, defending it is stressful and costs time and money. It is well understood that chapter 93A mandates the disclosure to prospective buyers of any known issues or problems that would be material to a reasonable buyer of the property.

But, there can also be liability under chapter 93A and at common law for things that the broker did not know, if the broker has made statements in the course of marketing the property that turn out to be untrue. It is not necessarily a defense that the information came to the broker from the seller and that the broker believed the statements to be accurate. Where the broker has repeated these statements as facts while listing or marketing the property, the issue will be whether the broker acted reasonably in doing so.

Many 93A claims based on alleged marketing misrepresentations concern how a property can be used or is zoned. For example, a property may be advertised as having an in-law apartment that turns out to be unlawful under local zoning ordinances. A property may be advertised as having four bedrooms, but wastewater regulations allow only two. A property may be marketed as a two-family when only one unit is lawful. A room in the basement or attic advertised as an extra bedroom may fail to meet code requirements for windows or dimensions. The list goes on and on.

There was a time when real estate agents could take comfort in a general rule that zoning questions were for lawyers, not real estate agents. In Quinlan v. Clasby, 71 Mass. App. Ct. 97, 103 (2008), the broker marketed a property as a three-family residence. Having looked at the property and at the municipality’s tax records the broker believed the use to be lawful. As it turned out, the property had a variance that allowed three-family use, but only if the units were on the first floor. The upstairs units were being used unlawfully, as the buyer discovered years later when she tried to sell the property and had two deals fall through. The buyer sued both the seller and the broker for the lost market value she had incurred. On appeal of a decision against the broker, the Appeals Court reversed.

The court stated that the broker did “all that was legally required” when he inspected the unit and looked at the tax documents. The court observed that, had the buyers engaged an attorney when they first purchased the property, the zoning issue presumably would have been identified. This victory for the brokerage industry was undercut a few years later by the case of Dewolfe v. Hingham Center Ltd, 464 Mass. 795 (2013). There the seller had informed the broker that a property located in a residential neighborhood was zoned for “Business B” uses. That was not actually a zoning category in the town, but the broker passed this information along and marketed the property as being permissible for business uses. The buyer, Dewolfe, intended to use a portion of the premises for a hair salon, only to learn, after the closing, that the property in fact could not be used for such purposes.

Distinguishing the case from Quinlan, the Supreme Judicial Court held that the broker should have suspected that the zoning information was inaccurate and was obliged to investigate further. The Court summed things up as follows: “Where it is reasonable in the circumstances for a broker to rely on information provided by the seller, the broker will not be liable for conveying such information to prospective buyers without conducting further investigation. . . . By contrast, where it is unreasonable in the circumstances for a broker to rely on information provided by the seller, the broker has a duty to investigate further before conveying such information to prospective buyers.” The Court stated that the reasonableness of the broker’s conduct presented an issue for the jury.

Where does this leave us? In many cases, it will be for a jury to decide whether a broker acted reasonably in making a statement about a property’s attributes, zoning status, or permissible uses that has turned out to be incorrect.

To avoid being on the wrong side of a 93A letter, or leaving one’s fate to a jury, a listing broker should undertake reasonable due diligence before marketing a property. If the property is going to be marketed as containing an in-law unit or a multi-family property, the broker should take reasonable steps to determine whether this is consistent with local zoning laws. If there is a bedroom in the basement or crammed in the attic it should not be described as a bedroom or included in the bedroom count without making a reasonable inquiry into whether it is a lawful bedroom. If there is doubt on any of these issues, the broker would be well-advised not to describe the questionable attribute as a fact in the listing or marketing materials and to disclose to the buyer in a prominent way, in writing, that the broker has not independently verified the lawfulness of the specific use in question. In situations such as these, it is better to be safe than sorry.

Posted by

I pray that God our Father and the Lord Jesus Christ will be kind to you and bless you with peace

2 Thessalonians 1:2

 

Doug Dawes REALTOR®, AWREP, LMC

Broker Sales Associate

KELLER WILLIAMS REALTY - Topsfield/Newburyport

49 Main Street
Topsfield, MA 01983
 978-887-3995  ~ Office
 978-270-3037  ~ Cell
 DougDawes@KW.com

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Show All Comments
Rainmaker
3,538,457
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Doug and this is so true, you never know when something can come back and get you.

 

Aug 28, 2020 08:10 AM #3
Rainmaker
5,445,176
Barbara Todaro
RE/MAX Executive Realty - Retired - Franklin, MA
Previously Affiliated with The Todaro Team

if a use cannot be verified by the town/city authorities, do not promote that use.... only promote what you know to be FACTUAL....

Aug 28, 2020 10:29 AM #4
Rainmaker
3,448,550
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Doug yes extranious comments will potentially kill a deal  or create liability either way it is bad, Endre

Aug 28, 2020 11:29 PM #5
Rainmaker
3,573,712
Nina Hollander
Coldwell Banker Realty - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

Great reblog, Doug. I see way too many agents list properties without having done sufficient due diligence and who think if they put a disclaimer in MLS they are protected... well, not so much as far as NC Real Estate Commission is concerned.

Aug 29, 2020 07:24 AM #6
Rainmaker
3,573,712
Nina Hollander
Coldwell Banker Realty - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

Great reblog, Doug. I see way too many agents list properties without having done sufficient due diligence and who think if they put a disclaimer in MLS they are protected... well, not so much as far as NC Real Estate Commission is concerned.

Aug 29, 2020 07:26 AM #7
Rainer
445,273
Dan Hopper
Dan Hopper - Gold Way RE - Westminster, CO
Denver Realtor / Author / Advocate/Short Sale

Thanks,  , for providing this information.  It has great value to get an understanding of certain situations that legal action will take place.  All I can say to that... be sure to have your E & O insurance active.... even for a few years after one retires.

Aug 29, 2020 10:14 AM #8
Rainmaker
899,554
Doug Dawes
Keller Williams Realty - Topsfield, MA - Georgetown, MA
Your Personal Realtor®

Hi Grant Schneider 

So many agents get themselves into trouble because they didn't follow through

Aug 30, 2020 02:58 PM #9
Rainmaker
899,554
Doug Dawes
Keller Williams Realty - Topsfield, MA - Georgetown, MA
Your Personal Realtor®

Hi Ron and Alexandra Seigel 

I'm sure most states have some type of consumer protection laws. Every agent should be aware of them

Aug 30, 2020 03:00 PM #10
Rainmaker
899,554
Doug Dawes
Keller Williams Realty - Topsfield, MA - Georgetown, MA
Your Personal Realtor®

Will Hamm 

That is so true. You never know when something will come back and bite you

Aug 30, 2020 03:01 PM #11
Rainmaker
899,554
Doug Dawes
Keller Williams Realty - Topsfield, MA - Georgetown, MA
Your Personal Realtor®

Hi Barbara Todaro 

I know at Keller Williams we have checklists to complete that cover all the bases of due diligence

Aug 30, 2020 03:02 PM #12
Rainmaker
899,554
Doug Dawes
Keller Williams Realty - Topsfield, MA - Georgetown, MA
Your Personal Realtor®

Always have to be careful about what we say Endre Barath, Jr. If we don't know then we should just say I don't know and will find the answer. Never make assumptions

Aug 30, 2020 03:03 PM #13
Rainmaker
899,554
Doug Dawes
Keller Williams Realty - Topsfield, MA - Georgetown, MA
Your Personal Realtor®

It happens all the time Nina Hollander AND you're right that disclaimers might not be sufficient

Aug 30, 2020 03:04 PM #14
Rainmaker
899,554
Doug Dawes
Keller Williams Realty - Topsfield, MA - Georgetown, MA
Your Personal Realtor®

At Keller Williams, we have checklists to follow that covers the things we need to do for due diligence Nina Hollander BUT that doesn't keep a clamp on lips...lol

Aug 30, 2020 03:05 PM #15
Rainmaker
899,554
Doug Dawes
Keller Williams Realty - Topsfield, MA - Georgetown, MA
Your Personal Realtor®

So true Dan Hopper So very true. E&O is a good business expense to have

Aug 30, 2020 03:06 PM #16
Ambassador
4,301,197
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

Hi Doug:

This is an excellent reminder of the importance of investigating and confirming what has been stated about a property's use as just one example, and so many other issues. Important for buyers and sellers, too!

Jeff

Sep 05, 2020 04:56 PM #17
Rainmaker
899,554
Doug Dawes
Keller Williams Realty - Topsfield, MA - Georgetown, MA
Your Personal Realtor®

Hi Jeff Dowler, CRS 

Yes, it is and agents really need to do due diligence. The neighbor of a buyer from 7 years ago tried to throw me under the bus 2 years ago. It was my paperwork that helped

Sep 06, 2020 05:42 AM #18
Rainmaker
1,179,097
Barbara Michaluk
Weichert Realtors | Silver Spring, MD Phone Direct 240-506-2434 - Silver Spring, MD
Leisure World Specialist / Full Service REALTOR

You have highlighted the many reason why a realtor needs to be careful not to misrepresent a property.  Thanks for sharing this.

Sep 14, 2020 05:16 AM #19
Rainmaker
2,231,441
Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Flower Mound, TX
Selling Homes Changing Lives

Doug Dawes - EXCELLENT!

This is a great example about how easily one can be charged with Deceptive Trade Act because of disclosure.

 "We should not solely rely on information we receive from a seller, buyer or another Realtor®." 

Thank you for pointing this out and writing this very important Blog Post. Honestly, I don't know why you're not getting FEATURED. Other members of ActiveRain could benefit if they follow your sage advice and could find you on the front page FEATURES. I don't think it's fair to you. I'm sure glad I didn't miss this one!!!

Sep 14, 2020 06:38 AM #20
Rainmaker
899,554
Doug Dawes
Keller Williams Realty - Topsfield, MA - Georgetown, MA
Your Personal Realtor®

Hi Barbara Michaluk 

Thank you. Disclose, disclose, disclose and be truthful in everything without out assuming the answers

Sep 14, 2020 10:28 AM #21
Rainmaker
899,554
Doug Dawes
Keller Williams Realty - Topsfield, MA - Georgetown, MA
Your Personal Realtor®

Hi Patricia Feager, MBA, CRS, GRI,MRP 

Getting featured is something that's nice but I don't get caught up in it all. I do appreciate your kind words, though. 

Sep 14, 2020 10:29 AM #22
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