Broker Not Liable for Salesperson

Georgia Court of Appeals 2006: Walker v. Johnson

April 1, 2007

A Georgia appeals court has determined that a brokerage could not be held liable for a salesperson’s failure to disclose a property defect because the salesperson was an independent contractor and the brokerage had no knowledge of the transaction.

In the case, Ronald and Theresa Walker purchased a property that had a history of flooding in its backyard. In fact, the seller of the property had tried unsuccessfully to have the city or the property’s developer repair the problem before listing the property with a salesperson. Still, the disclosure form the Walkers received from the seller stated that she was unaware of any drainage problems on the property.

After trying to get the developer to remedy the problem, the Walkers sued the developer, the brokerage, and the salesperson, charging misrepresentation and fraud. The trial court and the appeals court ruled in favor of the brokerage and the salesperson.

The appeals court decided that the salesperson wasn’t liable for misrepresentation even though the agent testified she was aware of the drainage problems and that she “probably” hadn’t reviewed the seller’s disclosure statement. In addition, the court said, the salesperson was an agent of the seller and the purchase contract stated that the buyers couldn’t rely on the statements of real estate licensees.

The appeals court also considered the buyers’ claim that the brokerage was negligent because of its failure to adequately oversee the activities of its salesperson. The designated broker of the company testified that he had no knowledge of the transaction or of the drainage problem. As a result, the appeals court upheld the trial court’s ruling that the brokerage had no liability for the salesperson’s actions since the salesperson was an independent contractor.