MA real estate disclosure law

SJC Rules Realtor May Be Liable For Erroneous Zoning Info In MLS

by Rich Vetstein on April 19, 2013

in Disclosures, Massachusetts Real Estate Law, Permitting/Zoning, Real Estate Litigation, Realtors, Zoning

Massachusetts real estate closing attorneyExpands Realtors’ Disclosure Liability and Invalidates Exculpatory Clause In Standard Form Purchase and Sale Agreement

Unfortunately I have some bad news for Massachusetts real estate agents, as the Supreme Judicial Court recently ruled against a Realtor for failing to properly verify a representation made on MLS concerning a listing’s zoning classification. The closely watched case is DeWolfe v. Hingham Centre Ltd. (SJC-11168) (embedded below).

Zoned For Business or Residential?

The lawsuit was brought by a buyer of a hair salon business who relied upon what turned out to be erroneous information supplied by the listing agent (through information provided by the seller). The broker represented on the Multiple Listing Service (MLS) and newspaper advertising that the property was zoning “Business B,” which allowed a hair salon. Further, the broker placed at the property copies of pages from the town’s zoning by-law that listed hair salons as “Permitted Business Uses” in the Business B District. The property was not, in fact, zoned for business use; it was zoned residential, thereby prohibiting the hair salon the buyer wanted to open at the property. The buyer sued for misrepresentation and violations of the Consumer Protection Act, Chapter 93A.

Ruling: Realtors Have Duty to Exercise “Reasonable Care” In Making Zoning Representations

In an unanimous opinion by Justice Barbara Lenk, the SJC stated that while a real estate broker may ordinarily rely upon information provided by his client, where such reliance is unreasonable in the circumstances, an agent has a duty to independently investigate the information before conveying it to a prospective buyer.

The court ultimately held that all Massachusetts real estate agents have a duty to exercise reasonable care in making representations as to a property’s zoning designation.

Here, the owner testified that he told the real estate broker that the property was zoned “Residential Business B.”  The experienced broker apparently knew that there was no such zoning district in Norwell, and instead advertised the property as zoned “Business B.”  In addition, the broker was aware of no prior business use of the property, and had observed houses – not businesses – adjoining the property on either side.  Based on these facts, the SJC concluded that a jury could find that the broker was on notice that the information provided by the owner was unreliable, and acted unreasonably in representing the property as zoned “Business B” without conducting any further investigation.

Exculpatory Clause in Standard Form P&S Not Applicable

The SJC also rejected the broker’s argument that the exculpatory clause in the standard form purchase and sale agreement barred the buyer’s claims. The familiar contract language provides:

The BUYER acknowledges that the BUYER has not been influenced to enter into this transaction nor has he relied upon any warranties or representations not set forth or incorporated in this agreement or previously made in writing, except for the following additional warranties and representations, if any, made by either the SELLER or the Broker(s): NONE.

The justices held that, under the confusing, double-negative language quoted above, a buyer can rely on prior written representations that are not set forth or incorporated in the agreement. Therefore, the agreement did not protect the broker from liability arising from the written misrepresentations in the newspaper ad, the MLS listing, and the inapplicable zoning by-law placed at the property.

The SJC has sent the case back to the trial court for a possible jury trial or, most likely, towards settlement. And hopefully the Greater Boston Real Estate Board is re-drafting its poorly worded exculpatory clause.

Advice For Realtors Going Forward

  • Do NOT say or write anything on MLS or anywhere else concerning a property’s zoning status. Make the buyer conduct his/her own independent research.
  • If your MLS requires input of zoning status, put the zoning with the following disclaimer:  *subject to buyer verification
  • Never trust your client when it comes to information concerning the property. I hate to say this, but when it comes to disclosures, it’s true.
  • Always independently verify information about the property from available public sources. Here, the agent could have simply gone down to the town planning office to verify whether the property was zoned commercial or residential.

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RDV-profile-picture-larger-150x150.jpgRichard D. Vetstein, Esq. is a Massachusetts attorney with substantial experience in real estate disclosure litigation brought by buyers against Realtors. Please contact him at [email protected] or 508-620-5352.

 

Dewolfe v. Hingham Center

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Is “Buyer Beware” Alive and Well? An Overview of Massachusetts Real Estate Disclosure Law

by Rich Vetstein on June 21, 2011

in Condominium Law, Construction Law, Disclosures, Massachusetts Real Estate Law, Offer To Purchase, Purchase and Sale Agreements, Realtors, Safety

iStock_000003014021XSmal.jpgCaveat Emptor: “Let The Buyer Beware”

Caveat Emptor is an old common law rule which means “Let the Buyer Beware.” In plain English, it means that home buyers are on their own when it comes to the condition of the property. If there is a defect of any kind, it becomes the buyer’s problem, not the seller’s.

Most home buyers are unaware that in Massachusetts, with a few exceptions, the rule of Buyer Beware is still alive and well. That is why in the vast majority of transactions, buyers choose to have the property inspected by a licensed home inspector. And it’s also why there is a contingency in the offer or purchase and sale agreement giving the buyer the right to opt out of the agreement if there are serious issues.

But what happens if the home inspector misses a broken A/C unit, or the sellers concealed that the basement flooded, or the Realtor didn’t tell the buyers there was a Level 3 sex offender next door? These are all thorny disclosure issues.

Private Sellers: No Duty to Disclose

A private seller has no legal duty in Massachusetts to disclose anything about the property (except for the presence of lead paint). Yes, you read that correctly. He doesn’t have to say boo. Will that assist the buyer in selecting the home for purchase? Maybe not. But if the basement floods, the seller does not have to say anything about it.

A seller, however, cannot affirmative misrepresent a material fact about the property. That is, if the seller is asked a direct question, such as “has the basement ever flooded?” and he answers “never” when it has, he has lied and can be held liable for that.

Most agents will insist that Sellers fill out a Statement of Property Condition (see below) which will fully disclose just about every conceivable condition of the premises. However, the standard form does contain small print language purporting to limit the agent and seller from disclosure liability.

Real Estate Agents: Heightened Duty

Under Massachusetts consumer protection regulations governing real estate brokers, a broker must disclose to a buyer “any fact, the disclosure of which may have influenced the buyer or prospective buyer not to enter into the transaction.” This is somewhat of a subjective standard; what may matter to one buyer may not matter to another. If a broker is asked a direct question about the property, she must answer truthfully, accurately, and completely to the best of her knowledge. Further, a broker cannot actively avoid discovering the details of a suspected problem or tell half-truths. This is why most Realtors err on the side of full disclosure, as suggested in Bill Gassett’s blog.

As for that Level 3 sex offender living next door, I would advise the listing agent to disclose that fact. The Massachusetts Supreme Judicial Court has held that off-site physical conditions may require disclosure if the conditions are unknown and not readily observable by the buyer and if the existence of those conditions is of sufficient materiality to affect the habitability, use, or enjoyment of the property and, therefore, render the property substantially less desirable or valuable to the objectively reasonable buyer. I think a dangerous sex offender would be something a buyer would want to know about, wouldn’t you?

Home Inspectors

In 1999, Massachusetts joined a growing number of states that require home inspectors to be licensed. There is now a state Board of Registration of Home Inspectors. Home inspectors are now required to carry at least $250,000 of errors and omissions insurance. The board is empowered to suspend licensed home inspectors for violations of the statute or regulations and to impose civil penalties on persons purporting to conduct a home inspection without the required license.

A home inspector is one of the most important referrals your Realtor will give you. Most agents know which inspectors are great and which are terrible. If you are the unfortunate victim of an incompetent home inspectors, they can be sued civilly for breach of contract or negligence.

Massachusetts Sellers Disclosure//

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Real Estate Fear Factor: Dealing With Stigmatized Property

by Rich Vetstein on June 8, 2010

in Appraisals, Disclosures, Massachusetts Property Values, Massachusetts Real Estate Law, Realtors

haunted_house-1.jpgThe well maintained 4 bedroom Colonial in a North Shore suburb with a great backyard looked nice enough thought “Debbie,” the buyer. However, she was dismayed to learn from neighbors after closing on the property, that the prior owner had committed suicide in the house. The real estate agent never advised her of this, and she says she would have never purchased the home if she had known this.

In Massachusetts, real estate brokers struggle to sell homes tainted by shocking murders, suicides, or even suspected “haunted houses.”  For real estate brokers, sellers and buyers, these “stigmatized” properties are particularly difficult to deal with as they raise unique valuation problems and disclosure issues.

“Haunted Houses”

Under Massachusetts law, however, real estate brokers and sellers are under no legal obligation to disclose that a property was the site of a felony, suicide or homicide, or has been the site of an alleged “parapsychological or supernatural phenomenon,” i.e., a haunted house. Thus, buyers are on their own to discover these types of stigmas—however, a quick Google search on the property address or prior owner may have revealed the prior suicide in “Debbie’s” case.

Power Lines, Cell Towers & Underground Gas Pipelines

Less notorious, but equally challenging, are stigmas such as high tension power lines, cell towers, high pressure underground gas pipelines, landfills, nearby sex offenders, former Army bases, and other environmental concerns. These are much more challenging to handle, and are becoming increasingly prevalent.

While there is an ongoing debate whether electric and magnetic radiation emitting from powers lines and cell towers are harmful to humans, there are studies suggesting that buyers perceive them as health hazards and will drop asking prices accordingly. Neighborhood opposition to cell towers and new gas lines are becoming increasingly widespread, vocal and well-organized. Also, virtually all power lines and gas pipelines running over property will carry with them recorded easements which typically restrict building near the lines. Depending on the proximity of the lines, these easements may impact potential home additions and backyard activities such as pool installations, etc.

Buyers need to be cognizant of the impact of all potential stigmas, whether well-publicized or not. For most off-site conditions, Realtors and sellers are under no legal obligation to disclose them to buyers. Buyers, you need to do your due diligence. Check the town assessors maps (often available online), registry of deeds information, the Mass. sex offender registry, use the internet and Google Maps to verify any potential impacts on the property, and drive around the neighborhood. You’d be surprised what you’ll find.

Helpful links:  National Ass’n of Realtors Field Guide To Stigmatized Properties

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