Buyers Can Sue Their Brokerage For Not Disclosing Defects

Aranki v. RKP Investments Inc. et al, Arizona Court of Appeals, Division One, CV 95-12017

August 1, 1999

An Arizona court ruled recently that homebuyers could sue their salesperson and broker for failing to disclose the home’s defects, because the contract clause waiving broker liability was unenforceable. This case distinguished between the disclosure duties owed to the buyers by the listing brokerage and those owed by the brokerage representing the buyers.

The buyers sued the listing broker and salesperson, the sellers, and their own broker and salesperson after discovering defects in their newly purchased house.

In a summary judgment, the judge ruled against the homeowners.

On appeal, the court said the listing brokerage was not liable because it didn’t know about the defects and had no duty to investigate the representations made by the seller. But the court reversed the rest of the original judgment, allowing the buyers to sue their salesperson and broker.

Although there was a clause in the purchase contract that released brokers from liability, the court found it unenforceable because it was part of a preprinted form, and there was no proof that the provision had been discussed or negotiated. If a form contract contains this type of clause, practitioners should explain to their clients that by signing they may be waiving any claims.

Robert Freedman

Robert Freedman is the former director of multimedia communications at NAR.

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