The court found that the buyer’s broker’s advice to client to “check [the report] out” is insufficient to avoid liability.
This case involved the sale of a vacant property in an earthquake zone. The seller’s broker stated in the MLS “This parcel is in an earthquake study zone but has had a Fault Hazard Investigation completed and has been declared buildable by the investigating licensed geologist. Report available for serious buyers.” All of which was true. The problem, however, was that the report was from 1982 and in the interim were the Loma Prieta and Northridge earthquakes; much had changed in the building standards from then to the sale of the property in 2006.
After closing, the buyer found that he could not build. He sued his broker, the seller and the seller’s broker, alleging that omitting the date of the report was a misrepresentation. The trial court found the buyer’s broker liable for breaching the fiduciary duty to the buyer. The seller and the seller’s broker where held not liable.
Buyer appealed only as to the seller’s broker. Following prior case law, the court found that, while a real estate broker owes their own client a fiduciary duty, they owe third parties who are not their clients only those duties imposed by regulatory statutes. These duties include honesty, fairness and full disclosure as well as the Civil Code section 1088 responsibility for the truthfulness of statements in the MLS. The court found that the statement was in fact true. There was a report. The geologist did find the parcel buildable. And the fact that the MLS did not state that the report was from 1982 was cured by the report’s availability, especially so when the report was dated May 20, 1982 on its face. The court held that the seller’s broker had met the requirements of honesty, fairness, and full disclosure.
The buyer’s broker, however, did not fare so well. The buyer’s broker merely gave the buyer a copy of the report, telling the buyer to “check it out.” The court states that the buyer’s alleged injury arises from the failure to investigate and understand the implication of the information that the report dated to 1982, a failure that the trial court found was the buyer’s broker’s responsibility, and not from the failure of the seller’s broker to provide information. Certainly something beyond “check it out” was required of the buyer’s broker. (Saffie v. Schmeling, filed March 7, 2014, Fourth District, Div. Two, 2014 S.O.S. E055716)
By Harrison K. Long. Source of this information is the California Association of Realtors and is for information only – and is not the providing of legal or professional real estate services. If you are a buyer of a home or residential property in California and have questions or do not understand an earthquake zone report for the property, you should consult with an experienced real estate attorney.
Property Buyers in CA Should Be Advised About Implications of an Earthquake Zone Report.