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How Real Estate Agents Can Avoid Getting Sued

“How Real Estate Agents Can Avoid Getting Sued.”  This was the title of a recent blog posting in The Rental Standard.  The author provided the following tips:  don’t act unethically; don’t cheat your client; make sure to leave a paper trail; and, don’t misrepresent the property.  These suggestions relate to intentional misconduct by agents and, by all means, I agree with these recommendations.  However, in my 20+ years of representing agents and brokers, I have rarely, if ever, found that the basis for including my client in the lawsuit was because of intentional misconduct.  Although these claims always seem to be included in the litigation, generally, the basis for asserting liability against the agent is a violation of NRS 645.252 – the duty to exercise reasonable care.

Many agents have asked me where you draw the line regarding what constitutes reasonable care.  Unfortunately, there is no definitive answer, and even more frustrating, the line always seems to be moving.  In 2007 a lawsuit was filed in the Maricopa County, Arizona Superior Court against a Seller and his agent.  The home was located in what appeared to be a quiet neighborhood in Phoenix.  After moving into the Premises, the Buyer met one of the neighbors – Ms. X.  The neighbor would often yell at the buyer and make verbal threats. The Buyer subsequently learned that the neighbor had called 911 hundreds of times, saying that people were breaking in or that her sister was shooting poison at their elderly mother’s legs.  Once, she met police at the door while holding a shotgun.  The Buyer asked the Seller to take back the house and he refused.

The former owner stated that he wrestled with whether to disclose the neighbor’s behavior but was told not to by his real estate agent.  Not surprisingly, the agent denies giving any such advice.   The Buyer argued that the Seller knew the neighbor was dangerous and hid this information.  Moreover, the Buyer argued that because the yelling and obscenities from the neighbor occur on a daily basis that the conduct constitutes a “nuisance”.   NRS 40.140 defines a “nuisance” as anything which is injurious to health, or indecent and offensive to the senses, or an obstruction to the free use of property, so as to interfere with the comfortable enjoyment of life or property.   Sounds like the crazy neighbor would be considered a nuisance in Nevada.

Here’s the problem for the seller.  Remember the catch all question on the Seller’s Real Property Disclosure Form – Any other conditions or aspects of the property which materially affect its value or use in an adverse manner (emphasis added)?  If this scenario occurred in Nevada and the agent informed the Seller NOT to disclose, he/she has problems.  First, the agent should be advising the Seller to seek the advice of an attorney about their legal obligations to disclose.  Second, the agent should DOCUMENT the advice or direction provided to the Seller.  The Arizona case did not go to trial but was settled by the parties.  Undoubtedly, the agent participated in the settlement and would have been responsible for at least the deductible relating to the errors and omission coverage.

PRACTICE POINTER:  Common sense can go a long way in protecting you in the litigation arena.  It really is no surprise that the minute the Seller in the Arizona lawsuit got caught failing to disclose something that adversely affected the use of the property, he attempted to blame the agent.  This is a great reminder that you should always be proactive in your defense and DOCUMENT important discussions so that years later when a lawsuit may arise there is a way to substantiate your version of the events.

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