Real Estate Agents Need To Be Careful About Disclosing Dual Agency

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Dual agency is a big deal to real estate agents.  It lets them represent both a buyer and a seller in a transaction.  Dual agency was the focal point of the Business Court's opinion last week in BDM Investments v. Lenhil, Inc., 2014 NCBC 6.  The Opinion shows the dangers of failing to disclose that you are acting as a dual agent.

If a real estate agent is acting as a dual agent she owes a fiduciary duty to both the buyer and the seller, "and must make a full and truthful disclosure . . . of all material facts [concerning] the [p]roperty."  Op. ¶43.

The fact of the dual agency is a material fact and must be disclosed.  Op. ¶44. 

Hollingsworth, one of the Defendants, did have a real estate license at the time of the transaction, but there's an issue of material fact whether he was acting as an agent for either the buyer or seller in the transaction.  Plaintiffs said that they would not have purchased ten residential lots for $850,000 if Hollingsworth had disclosed his relationship with the seller and the fact that he would earn a commission on the sale. 

The Plaintiffs wanted to rescind the transaction and get their $850,000 back, but there was nothing wrong with the property purchased, and there had been no misrepresentations about it by the purported agent.  As Judge Murphy observed, there are no:

case[s] under North Carolina law considering whether an undisclosed dual agency,
without any other misrepresentation or omission, permits a party to rescind a real
estate transaction if a jury finds the failure to disclose led to the purchase.

Op. ¶52.

He relied on two non-North Carolina opinions in ruling that if the jury at trial were to conclude that the failure to disclose a dual agency led to the decision to buy the property, that the Plaintiffs would be entitled to the remedy of rescission and also to pursue damages against Hollingsworth for "injuries not fully remedied by recovery of its purchase price."  Op. ¶53.

There would also be the danger of Hollingsworth having his real estate license revoked.  The General Statutes provide that a broker's license can be revoked for representing "more than one party in a transaction without the knowledge of all parties for whom he or she acts."  N.C. Gen. Stat. §93A-6(a)(4).  Hollingsworth died after the lawsuit was filed, so he doesn't face that danger. 

There are many more claims discussed in the BDM decision, but I have focused only on the dual agency aspect of the case because I am engaged to a real estate agent and I am of course now fascinated by real estate issues.  I felt it was necessary to make that disclosure.

Topics:  Conflicts of Interest, Disclosure, Real Estate Market

Published In: Business Torts Updates, Civil Procedure Updates, Civil Remedies Updates, General Business Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Brooks Pierce | Attorney Advertising

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