CA court upholds HOA suit against real estate agents

This important 2012 California case deals with, among other issues, a real estate agent’s duties to buyers in HOAs. The court found the realtors, acting in a dual agency capacity for the developer and builder, had violated their fiduciary duties to buyers by failing to disclose material facts: false budget numbers to induce buyers, failing to disclose material, public reports showing soil issues.

The Calif. appellate court held:

The statute gave ‘associations the standing to sue as real parties in interest in all types of actions for damage to common areas, including breach of implied warranty causes of action.’

The Realtors were dual agents in that they also represented the HOA members as buyers’ agents. Re/Max acted as dual agent in the sale of three parcels in Glen Oaks Estates, and Dilbeck acted as dual agent in the sale of one parcel in Glen Oaks Estates.

In sum, [the statute] does not replace dual agents’ fiduciary obligations to their buyer clients. . . . The Realtors breached their fiduciary duties as buyer’s agents by failing to disclose certain transactional documents, concealing facts . . . .

GLEN OAKS ESTATES HOMEOWNERS ASSOCIATION v. RE/MAX PREMIER PROPERTIES, INC.
As an aside:

In general, the normal real estate transaction, where there’s no dual agency, involves a selling agent representing the seller, and a different buyer’s agent representing the buyer. In Arizona, for example, the agent owes a fiduciary duty to his “client,” which is defined as the person who makes the commission payment to the agent. The agent “shall disclose in writing to all other parties any information the licensee possesses that materially or adversely affects [the sale]”, but the agent must “deal fairly with all parties.”

However, in almost 100% of the sales the buyer’s agent gets paid from the selling agent under a “co-broke” arrangement. The buyer’s agent then, according to R4-28-1101 of the Commissioner’s Rules, would have a fiduciary duty to the seller as that’s where he gets paid. Isn’t that a contradiction in the laws that creates a conflict of interest in the buyer’s agent? (Of course, the powers that be don’t see it that way – would confuse the issue). So, who’s really looking after the buyer’s interests? It appears dual agency does.

Furthermore, can a licensed agent who is required to take courses in agency, contract and real estate law hide behind the fact that he knows nothing, and therefore doesn’t have material HOA information in his possession? Would that be a reason for the media and government agencies and officials apparent role in an “unspoken alliance of nothing negative about HOAs”? If so, something is rotten in Denmark!

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Published in: on February 24, 2012 at 12:27 pm  Comments (5)  
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5 CommentsLeave a comment

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  3. […] of no negatives about HOAs” (Good night and very good luck – the unspoken media HOA alliance, CA court upholds HOA suit against real estate agents), and the failure of state legislatures to uphold constitutional rights (Proposed “consent to be […]

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