Last Update: 04/18/16
Real estate agents who commit fraud can cause buyers and sellers serious harm. However, proving fraud in a court of law is difficult because the injured party must provide evidence of intent; it’s not that easy to prove someone’s reason for doing something. (For details on proving a fraud claim, check out our recent posts discussing fraud by real estate agents in Florida.) Therefore, Florida real estate lawyers who pursue fraud cases often add another claim in their lawsuits: they also allege that the Florida real estate agent breached his or her legal duty as a fiduciary to the person who has suffered harm.
Real estate agents in Florida have a legal duty to act in the best interests of their client.
Under Florida law, the relationship between a real estate agent and a client is considered special. The relationship is known as a “fiduciary relationship” – (the real estate professional) is a fiduciary of the “beneficiary” (the buyer or seller).
Fiduciary relationships under the law exist when there’s a relationship based upon education, influence, expertise, or power. Examples of fiduciary relationships recognized in Florida include:
- Employer is fiduciary to employees
- Certified Public Accountant is fiduciary to clients
- Lawyer is fiduciary to clients
- Bank is fiduciary to customers (see Barnett Bank of West Florida v. Hooper)
- Executor is fiduciary to heirs.
Fiduciary Duty Means Special Legal Responsibility for the Real Estate Agent
As the Florida Supreme Court has explained long ago in Quinn v. Philips,
If a relation of trust and confidence exists between the parties (that is to say, where confidence is reposed by one party and a trust accepted by the other, or where confidence has been acquired and abused), that is sufficient as a predicate for relief. The origin of the confidence is immaterial.
Real estate agents who contract to help a buyer find a property or make a deal with a seller to help them sell their real estate not only have legal duties defined in that contract (like “warranties” which we’ll delve into in a future post) but they also have a special duty imposed upon them by Florida law.
If the real estate agent does something wrong when acting as a fiduciary, like fraud, then under the law they can be sued by the party that they represent. However, if there is no intent on their part to commit fraud, or to act in an illegal way, or there is insufficient proof of an evildoing intent, then their bad act may still constitute a breach of their fiduciary duty and they can still be held accountable under state law.
Examples of fiduciary duty breaches by real estate agents:
- Failure to reveal there is an active controversy over an easement or mineral rights prior to the sale of the tract;
- Failure to disclose that the yard floods in heavy rains, blocking access to the waterfront (or pier, or back road, etc.); or
- Failure to clarify that the agent does not represent prospective buyers when showing a property.
Breach of Fiduciary Duty Provides Tort Damages
If a real estate agent has been found to have breached their fiduciary duty to their client, a jury can not only grant an award of actual damages but they can also assess punitive or exemplary damages against the real estate professional.
Florida courts hold fiduciaries to a high standard of conduct. Fiduciaries hold positions of trust and under Florida law fiduciaries must never act in any way that is not in the best interests of their client, nor do something that is contrary to their client’s interests, nor act without full disclosure and they can’t fail to use their best efforts in their dealings with their client.
Any lawsuit brought against a fiduciary must show (1) a fiduciary duty exists: (2) the duty was breached by the fiduciary; and (3) the beneficiary was harmed as a result. Unlike a fraud claim, there is no evidence needed here of the real estate agent’s intent to do wrong or desire to benefit from their actions in order for the victim to prove their case.
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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I am writing to hopefully get some insight into whether my particular situation would constitute a breach of ethics….
I purchased a house and believe that the real estate broker and the mortgage broker breached their fiduciary duty to push the sale. As a result the price paid may not in fact represent the true value of the house.
Larry, do you have by chance any Florida case law pertaining to a real estate agent or broker, who sold his client’s property without due diligence and created a financial obligation to his client as a result of the agent / brokers actions?
Under Florida law, the presumed relationship between a real estate broker and their customer is a transaction broker relationship, which does not create a fiduciary relationship. A broker may elect to represent a buyer or seller as a single agent, which would create a fiduciary relationship, but only if the broker makes a written agency disclosure prior to taking the listing or showing property to a buyer. Most Florida brokers choose to operate as transaction brokers.
This is a very informative post. Worth sharing and reading for general/basic information. Thank you for posting this article. Looking forward to reading more from you.
WHAT IS CASE LAW OR STATE LAW TO SUPPORT CLAIM A LISTING AGREEMENT DOES NOT CREATE A FIDUCITARY DUTIES SITUATION
PER LISA SMITH ERRONOUS POST