In a unanimous decision handed down by the California Supreme Court in late November, the court held that real estate agents who represent both the buyer and seller of a property in a transaction face increased disclosure duties with respect to what they must provide to the buyer. The case arose out of a November 2007 purchase of a Malibu home listed as having 15,000 square feet of living space which the buyer later determined to be less than 9,000 square feet.
The Underlying Dispute Between Horiike and Coldwell Banker
The plaintiff in the case, a Hong Kong businessman named Hiroshi Horiike, had been working with a real estate salesperson named Chris Cortazzo at Coldwell Banker for several years in 2007 when he did a walkthrough of the Malibu property and was provided a marketing flyer for the property listing it as including “approximately 15,000 sq. ft. of living space” along with language elsewhere indicating that “Broker/Agent does not guarantee the accuracy of the square footage.” Coldwell Banker was also the real estate firm representing the buyer of the property.
Horiike completed a cash purchase of the property for $12.25 million and also signed two disclosure forms related to the fact that Coldwell Banker was the “listing agent” and “selling agent” and the “agent of both the buyer and the seller.” In 2009, Horiike discovered the square footage was closer to 9,000 foot and brought suit against Coldwell Banker for breach of fiduciary duty.
The Dual Duties that Agents Representing Buyers and Seller Face
The California Supreme Court held that Cortazzo functioned as an “associate licensee” on behalf of Coldwell Banker, and that, in that role, he owed fiduciary duties to both Coldwell Banker and to Horiike which were “equivalent” to one another. Furthermore, as an associate licensee, Cortazzo owed Horiike the same duties that Coldwell Banker owed Horiike, specifically the duty to disclose known facts materially affecting the value or desirability of the property, in this case the true square footage of the property.
In essence, the ruling makes clear that, “regardless of whether a listing agent also represents the buyer, it is required to disclose to the buyer all known facts materially affecting the value or desirability of a property that are not known to or reasonably discoverable by the buyer.”
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