Articles Posted in real estate broker

A corporation can be a licensed California real estate broker. All that is required is that an individual who is a licensed broker “place their license” with the corporation, by being the corporation’s designated officer/broker. State law assigns a duty to the designated officer to supervise the corporation’s salespeople. Experienced Sacramento and El Dorado real estate attorneys frequently see the designated officer named as an additional defendant in lawsuits against the corporation. A recent decision concluded that the designated officer does not owe a duty to the third party claimant under state law, nor through vicarious liability.

In Sandler v Sanchez, Sandler was a lender who claimed that misrepresentations were made by the real estate sales licensee as to the value of the property the loan was secured by. Sandler wanted also to assess liability on the designated broker. The plaintiff pointed to Business and Professions code section 10159.2, which makes the designated officer/broker responsible for the supervision and control of the activities of the corporation’s salespeople. They claim that, because the designated officer did not supervise the salesperson who made the misrepresentations, the designated officer was liable for those misrepresentations.

The court first looked at the statute, which does not say anything about liability to third parties such as this plaintiff. It noted that, prior to the enactment of this statute, courts had decided that the duty to supervise was only to the corporation, and not anyone else. So, while the corporation could sue the designated officer, third parties could not. It the reviewed the history of the statute, and concluded that it was intended to clarify that the duty was owed to the corporation, not third parties. This plaintiff had no claim against the designated officer under the statute.

Real estate brokers in California usually know the importance of a written agreement with their clients. First off, the statute of frauds requires there be a written agreement promising to pay a commission in order for them to be entitled to get paid. The agreement has to be signed by the client, unless it is ratified by the client. But there are other details to be included in an agreement between a broker and their principal, and to avoid ambiguity they should consult with an experienced Sacramento and El Dorado real estate lawyer. One such ambiguity recently landed a broker in court.

In Duncan v McCaffrey Group, the defendants were licensed California real estate brokers as well as developers. The developer-brokers marketed a project as a custom home development, in which only large custom homes would be build. The plaintiffs were a number of people and trusts who had bought lots in the development. They claim that they paid a premium price because it was to be an exclusive custom home development. However, they also claim that the broker at all times intended to build small tract homes in the subdivision (the developer actually amended the CC&Rs after they bought the lots to allow for smaller houses). As a result of building the tract homes, the values of the plaintiffs’ lots plummeted.

Critical Language

Ownership of California real estate is like owning a bundle of sticks, or a bundle of rights. These rights, or sticks, include the right to use, possess, and dispose of the property. Experienced Sacramento real estate lawyers know that some disputes depend on whether you own a stick in the bundle, or something else. A central California party recently learned, too late, that an option to buy was not one of the sticks in the bundle.

The question arose because of a statute of limitations – the deadline a party has to file a lawsuit before their rights are timed out. In Cyr v McGovran, the loser obtained options to buy some parcels of property. The owner later gave options to a lender on the same property that were to be effective only if the loser did not exercise his options in time. The loser’s deadline was December. However, someone screwed up, maybe the broker, because the later options to the lender said the deadline was in September- if the lender acted according to its option, it would exercise it too soon.

The lender recorded a memorandum of option in September, clouding the title. The loser closed escrow on the property in November, and the lender filed suit, recording a lis pendens, which tied up the property for a year before it was dismissed. Then the losers sued the sellers and their brokers for screwing up the dates on the options, claiming damages in hiring attorneys to defend the lender’s lawsuit, and for costs relating to holding on to the property while it was tied up in litigation.

A California Real Estate Broker has a right to payment of a commission only when there is a signed written agreement that provides for a commission. The commission is not earned until the broker completes the performance, and satisfies the conditions, spelled out in the agreement. But, as a recent decisions show, contract language regarding commissions is subject to interpretation, and concerned sellers , brokers, and agents may want to cunsult with an experienced Sacramento and Yolo County real estate lawyer.

In RealPro Inc. v. Smith the sellers entered a listing agreement with MGR, a broker. The agreement proved that a commission was earned when “a buyer is procured who is ready, willing, and able to buy the Property at the price and on the terms stated herein, or on any other price and terms agreeable to sellers.” It also authorized payment of commissions at close of escrow.

The listing price was $17 million. RealPro, another broker, presented a written offer to MGR for the full listing price. The listing broker then told MGR that the seller was increasing the listing price to $19,500,000. Except for the price, all other terms of the offer were acceptable. RealPro then demanded its share of the commission from MGR as a third party beneficiary of the listing agreement. MGR refused to pay, and RealPro sued.

California real estate brokers occasionally face lawsuits from disgruntled clients for negligence is performing their duties. A recent California decision points out that, where breach of fiduciary duty is alleged, the client has four years to sue, not two as in the case of negligence. This is a reminder that concerned broker should consult with experienced Sacramento and Yolo real estate lawyers regarding their rights and potential liabilities.

In Thomson v Canyon Thomson, facing foreclosure, listed her property with Broker Canyon. An investor approached the owner and offered to salvage her property from foreclosure by buying it from her, paying off the liens, and then selling it back to her within six months in exchange for her paying to the investor the amount of the liens, plus $10,000 profit for him. She agreed, and they entered a contract for sale. Supposedly Thomson asked the Broker numerous times to document the requirement that the buyer deed the property back to her; the Broker assured her that he would take care of this. Of course, he never did. The investor took title to the property, and eventually sold to a third party for $140,000m more than he had paid for it.

Thomson sued the investor, but the case was tossed because of the Parole Evidence Rule -she was attempting to introduce evidence of an oral agreement that was contrary to the written terms of the purchase contract. She next sued the Broker for breach of fiduciary duty and negligence.

Someone bought a property in Berkeley, then discovered that there was an easement across it that no one told her about. She sued her broker and the seller’s broker for failing to disclose the easement.

The buyer’s broker brought a cross-complaint against the seller’s broker for “equitable indemnity.” Under California law, where there are two tortfeasors (wrongdoers) who are both liable for the plaintiff’s injuries, they are entitled to have the liability split between them based on comparable fault. This can be accomplished through the cross-complaint for equitable indemnity.

However, the trail court judge threw out the cross-complaint, claiming that, since both brokers were already in the lawsuit, their comparable fault would be apportioned anyway in the trial.

Robbins was licensed both as a real estate broker and as an attorney. On January 23, 2001, he pled nolo contendere (no contest) and was convicted of three misdemeanor building code violations.

The DRE filed an action to revoke his license, based on this conviction plus a history of conviction for 50 prior violations. He also had been disciplined by the state bar. The broker argued that there was not showing of intent, and that the crimes did not involve moral turpitude.

Unfortunately for the broker, In 2008 the Legislature amended the statute to allow for revocation of a license without the need to prove moral turpitude. The court here pointed out that the law does not require a failure of honesty or truthfulness for the crime to be related to the broker’s fitness as a licensee. It also noted that the legislature found that a no-contest conviction is strong enough indicator of guilt to warrant discipline. His intent? It was to make money, and that was intent enough. His license was revoked.