2011 CASE LAW AND STATUTORY LAW SUMMARIES RELATING TO REALTORS
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The following is a summary of interesting case law and statutory law enacted in the year 2011 concerning the real estate industry. The text of any cited case below is available on line or through my office if you should want to review the entire decision.
BROKERS LIABLE FOR NOT DISCLOSING SHORT SALE
Holmes v. Summer (2010) 188 Cal.App.4th 1510. Listing Brokers can be liable for not disclosing transactions with a high risk of failure. In this case, Listing Broker did not disclose in the MLS that the transaction was subject to short sale approval. The transaction failed, Buyer sued and the court awarded $392,000 in damages against the Listing Broker.
Listing Brokers now owe a duty to disclose any factors which could result in failure or delay of the transaction including short sale, tenancy, probate or family court issues.
Listing Agents and Brokers beware.
STATUTE OF LIMITATIONS IS FOUR (4) YEARS FOR BREACH OF FIDUCIARY DUTY.
Thompson v. Canyon (2011) 198 Cal.App.4th 594. This is the first published case establishing that the statute of limitations for breach of fiduciary duty is four (4) years from the date of injury. This is why it is important to carefully document your file because you may not be sued until four (4) years after the transaction closes.
Document retention practices shall be at least four (4) years to comply with CCP 343.
BUYER LOSES DEPOSIT FOR FAILURE TO TENDER PERFORMANCE.
Conservatorship of Buchenau (2011) 196 Cal.App.4th 1031. Seller deposited the deed 30 days after the closing date. Buyer refused to pay the purchase price alleging that Seller breached. The Court awarded Seller $33,000.00 in damages and $37,000.00 in attorney fees. The Purchase Agreement did not include a liquidated damages provision.
This case demonstrates the importance of documenting the other party’s failure to perform. Using the NSP or NBP would have established the breach on the closing date and entitled Buyer to cancel.
If you represent a Seller, Seller must deposit the deed and sign escrow instructions. If you represent a Buyer, Buyer must have signed escrow instructions and document a willingness to fund the escrow.
CIVIL JUDGMENT FOR FRAUD MAY AUTHORIZE SUSPENSION OF LICENSE.
The Grubb Co., Inc. v. Department of Real Estate (2011) 194 Cal.App.4th 1494. Business & Professions Code §10177 provides numerous bases to revoke or suspend a license. DRE may revoke or suspend a license whenever “a civil judgment against a licensee is entered upon grounds of fraud, misrepresentation or deceit relating to a real estate transaction”.
It is important for agents to recognize that their license may be in jeopardy anytime they are sued by a Buyer or Seller for fraud, misrepresentation or deceit.
This is why it is important to consult with counsel when these issues arise.
GRATUITOUS AGENT FOUND LIABLE AS MORTGAGE BROKER.
Smith v. Home Loan Funding (2011) 192 Cal.App.4th 1331. Agent found her Buyer a home and then promised to “shop around to get her the best loan.” The Agent refers the Buyer to her affiliated “in-house” lender. After close of escrow, Buyer sued because another lender offered a loan on better terms. Court awarded $72,000.00 against the agent representing the difference between the interest rates over 30 years.
Agents must be careful what they promise to do for their client.
DEEDS OF TRUST EXPIRE TEN (10) YEARS AFTER THEIR FINAL DUE DATE.
Schelb v. Stein (2010) 190 Cal.App.4th 1440. Court entered order of quiet title terminating a Deed of Trust ten (10) years after its final due date. Quiet title means that the Deed of Trust was no longer effective pursuant to Civil Code §880.020.
Keep in mind that Deeds of Trust can be terminated unless foreclosure occurs within ten (10) years of their final due date.
SB 931 & SB 458: RESIDENTIAL SHORT SALES.
Effective June 1, 2011, all trust deed lenders to waive their right to a deficiency as a condition to approving any short sale involving a residential transaction. No lenders continue to have a right to deficiency following short sale. This applies regardless of whether the loan is recourse or non-recourse, and regardless of whether the property is owner or non-owner occupied.