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Fiduciary Duty At Rick When Representing Competing Buyers

Written by on Monday, 10 September 2012 7:00 pm
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The Good Book says we can't serve two masters (Matt. 6:24, Luke 16:13), but what about when an agent represents competing buyers who want the same property? There doesn't appear to be clear Biblical direction on that issue, so we must turn to other sources.

A recent posting on Realtor.org by the Legal Department of the National Association of Realtors® (NAR) addresses the issue as it was considered by the Court of Appeals of Ohio's Tenth Appellate District (Ford v. Brooks, March 8, 2012). The facts were as follows.

Donna Brooks served as real estate agent for Jeff and Lisa Ford. She showed them a property at 40 Wexford Drive. On July 16, 2010, Ms. Brooks' husband, also a real estate agent, escorted Lisa Ford through the property at which time she measured for furniture and discussed various issues related to a purchase. Subsequently, Mr. Brooks told a friend that "Donna's clients [the Fords] are in the process of writing an offer on the [property]." Mr. Brooks' friend "indicated the [property] was his dream home and he wanted the house…" Shortly thereafter, he wrote an offer through Ms. Brooks. The Fords learned about the offer from the property owners. They then wrote their own offer, through Ms. Brooks, but the offer of Mr. Brooks' friend was ultimately the successful one.

Naturally, a lawsuit was filed. There were a variety of claims, including breach of fiduciary duty, breach of contract, and fraud. The trial court dismissed the entire suit, finding that the Fords had failed to allege claims upon which relief could be granted. Essentially, even if the facts alleged were true, there was no case.

When an appeal was filed, the appellate court upheld the dismissal of some of the claims, but it overturned the trial court regarding the dismissal of the claim of breach of fiduciary duty. (Remember: overturning the dismissal doesn't say the defendants are guilty. It only says that the charges shouldn't have been dismissed. It says that those matters should be tried on the facts.)

As in other states, Ohio real estate agents and brokers owe a fiduciary duty to their clients. One of the things that means (in Ohio, at least) is "Keeping confidential all confidential information, unless the licensee is permitted to disclose the information…" The appellate court noted "'confidential information'" is defined as "all information that a client directs to be kept confidential or that if disclosed would have an adverse effect on the client's position in the real estate transaction… and all information that is required by law to be kept confidential." [my emphasis] Thus, the appellate court held that whether or not fiduciary duty had been breached by the disclosure of confidential information was a question of fact that should be considered in a trial.

Secondly, the appellate court held that whether or not writing two offers for different parties was a breach of fiduciary duty also needed to be tried. Ohio law specifically states that a "licensee does not breach any duty or obligation to the purchaser by showing the same properties to other purchasers or by acting as an agent of subagent for other purchasers." However, the appellate court observed "The allegations here involve not only showing the property to multiple purchasers or acting as an agent for multiple purchasers, but also involve the licensee writing competing offers on the same property on behalf of two different clients. We cannot say, as a matter of law, that R.C. 4735.65(B) [the statute] necessarily permits a licensee to write competing offers." One can only speculate what a jury might decide.

The California Association of Realtors® (CAR) produces a form, "Disclosure and Consent for Representation of More than One Buyer or Seller." It should be widely used. While it is primarily designed to cover situations where different agents in the same company, perhaps even unknowingly, are representing competing parties, it certainly covers individual agents as well. It would appear to cover the situation of writing different offers for competing buyers, though it does not give permission to reveal confidential information. It does, though, warn buyers that their offers are not considered confidential unless there is a specific agreement to that effect.

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