Property Purchase Breaches Duty

Louisiana Court of Appeals; Cousins v. Realty Ventures Inc., 2003

May 1, 2004

A broker showed a buyer, Don Cousins, an 8,000-square-foot office building that was being sold by a corporate owner. The pair also looked at an adjacent 33,000-square-foot building owned by the corporation. Cousins told the broker he wasn’t interested in the larger building but made an offer on the smaller property.

After hearing nothing for several months, the broker resubmitted the original bid even though Cousins had asked him to increase the offer. At this point, a corporate employee told the broker that the company only wanted to sell the two buildings as a unit. The broker made an offer on his own behalf for both properties without telling Cousins.

Some months later, Cousins noticed a For Sale sign on the properties and called its listing broker. Told that the corporation only wanted to sell the two buildings together, Cousins submitted an offer for both properties, only to be told that there was a pending offer.

Cousins’ original broker informed him that he had made an offer to purchase the buildings. If the deal closed, he also offered to sell Cousins the smaller building at twice the price Cousins initially offered. Cousins brought a lawsuit against his broker, alleging breaches of fiduciary duty for failing to disclose the broker’s interest in the property and acting in a dual capacity.

The broker argued that under Louisiana law at the time, there were no specific duties for a buyer’s representative and the parties didn’t have a written agreement. The broker also maintained that his duty to Cousins ended at the time he submitted Cousins’ first offer.

However, the jury and later the appeals court agreed that continued conversations between Cousins and the broker demonstrated that the relationship still existed. The appeals court also found that practitioners owe a duty to communicate offers in a timely fashion and to relay accurate information about a property to clients even without a written contract.

Waiver doesn’t exempt disclosure

Florida District Court of Appeal; Syvrud v. Today Real Estate Inc., 2003

A Florida appellate court has found that a listing broker may be liable for negligence for failing to disclose known latent material defects even though the purchase contract included an “as-is” clause. This clause stated that neither the sellers nor the listing broker had made any verbal representations or guarantees as to the condition of the property. After purchasing a townhouse, Erik and Carol Syvrud discovered that the property had water damage and structural defects. They also learned that several buildings in the homeowners association had substantial structural problems.

The Syvruds sued the sellers and the listing broker. A trial court dismissed the case, but the court of appeals reinstated it because under Florida law, an as-is clause doesn’t remove the obligation to disclose known hidden defects to the buyers. However, the court added that it hadn’t attempted to rule on whether the buyers could’ve waived the duty of disclosure in other ways, such as by signing a waiver.

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