Last Update: 04/18/16
Real Estate Professionals Acting Badly —
Fraudulent misrepresentation involves a broker or agent knowingly providing misinformation to a buyer or seller that is relied upon by them to their harm or detriment.
What is a Fraudulent Misrepresentation?
These are false statements that are intentionally made in order to get a transaction closed and a commission paid. Depending upon who got hurt by the agent’s conduct, Florida law is well settled that the agent is liable for their fraudulent misrepresentations. See Young v. Johnson, 538 So.2d 1387 (Fla. 2d DCA 1989).
How does someone hurt by a real estate professional’s fraudulent conduct get help? The injured party can demand their damages be paid by the wrongdoer (or the agent’s insurance company) and, if necessary, the injured party can sue the real estate professional for money damages in a civil lawsuit. The injured party can also complain to the Florida Department of Business and Professional Regulation, which oversees the licensure of Florida real estate professionals, and file a complaint which can result in discipline (even loss of license) of the broker or agent.
Florida Real Estate Sales Documents Don’t Reveal That Broker’s Mother in Law is Buyer
In the case of Santaniello v. Dept. Of Prof. Reg./Bd. Of Real Estate, 432 So. 2d 84 (Fla. Dist. Ct. App. 1983), a Florida real estate broker named Bernard Santaniello contacted Mr. and Mrs. Long in a letter written on his brokerage stationery. The Longs did not contact a broker; he wrote to them. In his letter, the broker inquired if they might be interested in selling two real estate lots that they owned in Port Charlotte, Florida.
Enclosed with his letter was a sales contract showing the proposed sales price for each lot ($1200) and his proposed commission of 10% of the sales price or $120, whichever was greater. The documents explained that he would be earning that commission through his “professional services.”
Here’s the kicker: the broker had already found the Longs a possible buyer! Identified in the documents was a prospective buyer named Anni Czaplinski.
She had already signed on the dotted line, she was ready to close the transaction. All the Sellers had to do was sign the paperwork, and voila! The deal was done.
What a sweet surprise in the mailbox, right? Well, the Longs thought not so much. They declined Mr. Santaniello’s proposed agreement because they thought their lots were worth more than what he was suggesting. And they apparently thought there was something fishy in all this. The Longs investigated.
At some point, they discovered that the buyer was the mother of the broker’s wife. At no time did the broker tell the Longs that Anni Czaplinski was his wife’s mother.
Are Damages An Element of a Misrepresentation Claim?
Here’s the good news. Because the couple was smart enough not to sign on the dotted line of the contract that they received from the broker, the property was never sold. Thus, they were not financially harmed.
In a fraudulent misrepresentation lawsuit, a key element to the claim is being able to prove damages. A plaintiff must show that he or she relied upon the material misrepresentation and was hurt by doing so.
Fortunately for the Longs, they were not financially harmed because they didn’t sell the lots; therefore, they could not receive compensation for their claim against the broker. But that didn’t mean that the real estate broker didn’t commit fraud for failing to disclose the fact that the buyer was his mother in law.
Can A Real Estate Professional Be Fined For Their Bad Acts?
A case was filed with the Florida licensing authorities (The Florida Real Estate Commission) that oversee the activities of real estate professionals. At the hearing, it was held that the fact the proposed buyer was the mother in law of the broker was a “material fact” that the sellers had a legal right to know; therefore, the broker had violated Florida Statutes 475.25(1)(b)(1979) and would be fined.
That law provides a broker will be disciplined when he is found “… fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme, or device, culpable negligence, or breach of trust in any business transaction.”
The broker then appealed the Commission’s determination to the Florida appeals court. He lost there as well. Even though the sellers were smart enough not to be victims of fraudulent misrepresentation, it doesn’t mean that the broker is going to go unpunished.
In Florida, real estate professionals have to reveal all facts within their knowledge that might be considered material to the deal by the parties they represent. They must reveal anything that “might reasonably be expected to influence the complete loyalty of the [broker]…. ” MacGregor v. Florida Real Estate Commission, 99 So.2d 709 (Fla. 1958).
According to the Florida appeals court, and the Florida licensing board, the broker had a duty to the Longs and the fact that the proposed buyer was his wife’s mother was a material fact that should have been shared with them in his proposal. It was fraudulent conduct not to do so.
What Should You Do?
A good piece of advice if you believe you have been harmed by a fraudulent misrepresentation made by a real estate professional, is to 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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