Misrepresentation by a Real Estate Professional: Claims for Negligent or Unintentional Misrepresentation
Posted By Larry Tolchinsky on July 28, 2015
Last Update: 04/18/16
Have You Been Harmed?
Negligent misrepresentation by a real estate agent or broker can also be described as an unintentional misrepresentation; where the agent or real estate broker communicates something that is not accurate or true, but they are not doing so knowingly.
In these situations, the real estate professional does not mean to deceive anyone. They’re probably not trying to pull a fast one to get through closing and get that commission check deposited in their bank account. They make a mistake. They commit an error. However, it’s a big mistake or error, not a little one and enough that the buyer wouldn’t agree to buy or the seller wouldn’t agree to sell if the facts were all out there (or the mistake or error is large enough that it has some material impact on the value of the property or causes a financial harm to one of the parties).
What is Negligent Misrepresentation Under Florida Law?
In a negligent misrepresentation case, the agent or broker has failed to meet their legal duty of care in some way, and that failure has caused damage or harm to someone to whom they owe that legal duty of care. Even if the agent or broker does not have any actual knowledge that something they have said is not true, they can probably still be held liable (they can still be held liable even if they believe the information they share is completely correct at the time they speak). To be safe, a good real estate agent will investigate to see if the information they share is accurate.
The key here? Agents and brokers owe a legal duty to their customers. Listing agreements (and/or buyer representation agreements) will sometimes set forth those duties (duties are also set forth in statutory law and in case law). However, be careful, some of these agreements will include language limiting an agent or broker’s legal duty of care (which is why having a real estate lawyer review those agreements can be of value).
Mistakes are made in residential real estate sales. People are human, right? There is legal recourse for buyers and sellers who are hurt by mistakes made by real estate professionals.
Remedies for Unintentional Misrepresentation
1. Claims on Insurance Coverage
Florida real estate professionals are also sometimes covered by insurance policies in the event that they make mistakes that hurt someone. These are called “error and omission” policies. If someone is hurt by the actions of a real estate agent or real estate broker, (for failing to act or sharing incorrect information, etc.) then a claim can be made against that “E&O” policy to cover the costs of the mistake.
It’s important for buyers and sellers to know that there is no law that requires real estate agents or brokers to carry E&O insurance coverage. Still, given the risk that makes Florida real estate brokers liable for the mistakes of their agents, it’s considered a smart business practice to pay for these policies. Most licensed residential real estate professionals here do have E&O insurance coverage to cover them in the event they make a mistake.
2. Licensure Revocation or Discipline
In Florida, real estate brokers and real estate agents, are required to be licensed by the State of Florida to do business here. Licenses are issued, in part, to protect sellers and buyers from mistakes and errors by the brokers and agents. This is done by requiring the professionals to take examinations proving their knowledge of real estate before they can get licensed and by requiring continuing education on a yearly basis. See, Florida Statutes 475.001 et seq. If someone gets hurt by a licensed real estate agent or broker, one action that can be taken is seeking the suspension or revocation of that license by the state.
It’s important to know that this doesn’t mean that everyone out there working in the Florida residential real estate market as a real estate agent has an active, clean license to do so. Buyers and sellers should make sure that they are working with a licensed real estate professional.
3. Rescission and Refunds
Other remedies that can be pursued under Florida law for negligent misrepresentation by a real estate agent or broker include things like:
- Rescission of the sale (voiding the transaction); and
- Seeking a refund of all the real estate commissions that have been paid.
An Example of Where the Buyer Wasn’t Told Everything About the Condominium By Her Broker / Agent
Here’s an example of negligent misrepresentation. In the case of Baldoria v. Security Realty Inv., Inc., a buyer named Margaret Baldoria signed a real estate sales contract with sellers Irving and Diane Feinzig. She was buying their condo. Security Realty Investment, Inc., was acting as the buyer’s real estate broker. Mrs. Baldoria provided $10,000 as a deposit; Security Realty acted as escrow agent for that money.
However, during the closing process, Mrs. Baldoria learned that the condo unit she had agreed to buy was subject to a recreation lease. She didn’t want that. Additionally, the parking for the condo unit was less than what Mrs. Baldoria had been told she would have.
Mrs. Baldoria complained to Security, and demanded return of her deposit. As escrow agent, upon instructions from the Feinzigs, Security refused. So Mrs. Baldoria went to court, filing a lawsuit based upon negligent misrepresentation.
Specifically, the buyer sued her Florida real estate broker for negligent misrepresentation on the part of the broker and the agent that worked for the real estate brokerage. As buyer, she sought in damages (1) that her deposit be returned to her and (2) the contract for purchase of real estate rescinded.
She argued that she had been induced to sign the purchase contract by the negligent misrepresentations by her broker of what she was getting, and that she would not have agreed to buy the Miami condo if she had known about the limited parking and the recreation lease. At trial, the jury agreed with her. (The case was later appealed but only on the issue of who paid her attorney’s fees.)
A good piece of advice is to at least speak with an experienced Florida real estate lawyer to learn about your rights. Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.
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