Are property managers liable when they fail to fulfill client requests? We had our property manager listed as the real estate agent when we decided to sell. It turns out the property was in terrible shape from the last renters. He kept this information from us. Can we hold him liable for not making the house ready for viewing when he told us it was?
Sounds like you ran into a conflict of interest from the get go! In his role as a real estate agent or broker, he certainly had a responsibility to get the best price for you he could. And if he’s earning a percentage commission on the sale, the incentives to do so are baked into the cake.
But as a property manager he may have had an incentive to conceal the true condition of the property to you – especially if he has trouble accounting for security deposits that could have been used to repair the dwelling. If the property was in terrible shape, did he return the security deposit to the last tenant?
On to the issue of holding him liable, you have to look at two separate levels of engagement: your engagement with him as your property manager, and as your listing agent/broker.
The first step is to look at the contract you had with him for property management. Was he in breach of any provision? What were the provisions in place for termination of the contract? Was there any provision for inspecting the property? If he can be demonstrated to be in breach of the property management contract, then that might be the easiest way to go.
Turning now to the question of his role as your listing agent or broker, the question will probably turn, in part, on the kind of relationship you elected to create with your Realtor. In Minnesota, under Chapter 82, Section 82.67, a seller essentially has three choices: You can engage the Realtor as a seller’s broker, a dual-agency broker representing both buyer and seller, or a facilitator.
Early in the relationship, your Realtor should have handed you an agency disclosure form, usually entitled “Agency Relationships in Real Estate Transactions.”
If you selected to engage the Realtor as a seller’s broker, he has some specific fiduciary duties to you. Your case against him is strongest if you selected to engage him as a seller’s broker, because his fiduciary duty to you means that he has the highest obligation of care and fair dealing to you recognized under the law. If he has a fiduciary duty to you, then he must act solely in your best interest.
It is possible he may have been negligent, or he may have committed a breach of fiduciary duty.
If you elected to have him act as a dual agent, he still owes a fiduciary duty to you – but loyalties, of course, are divided. He also owes a fiduciary duty to the seller.
If you elected to have him act as a facilitator, then he does not owe you a fiduciary duty other than confidentiality, which is not an issue in this case. That’s critical, because some complaints you might bring against the Realtor rely on there being a fiduciary relationship in place before you can get a judgment in your favor, or before the Minnesota Real Estate Commission can formally sanction a licensed broker.
So, if you want to pursue a lawsuit against this Realtor, you have the best chances of success or at least a favorable settlement if you can demonstrate that there was, in fact, a fiduciary relationship in place.
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