According to a complaint by the seller's daughter, who's just looking out for her dad, the listing agent representing her father failed to let him know that he was marrying one of the property's buyers.

Agency disclosure laws require agents to detail to clients and customers what their relationships might be with the other party, but from a representation standpoint.

Is this more than an ethical lapse?

Dear Mrs. Evans,

I greatly appreciate you taking the time to read and consider this situation:

My father is involved in the sale of his property in Sarasota, Florida. The property is currently under contract and has been since December of 2005. The contract will expire on September 1, 2006. My father is working with a realtor and signed a Disclosure form with this realtor which stated that the realtor was working as the listing/transaction broker.

Our concern is that this realtor failed to disclose a personal relationship with the buyer. In fact, this realtor married one of the buyers last month and never said a word to my father that he had a personal interest in the transaction. Over the past few months we have learned that the property was grossly undervalued. Previously licensed as a realtor in Wisconsin myself, I know that it is illegal in this state to not disclose such a personal relationship. What do the Florida laws state and do we have any recourse?

Thank you so much for any advice and/or direction.

-- Concerned Daughter

Realty Times responds:

Dear Concerned Daughter,

From the language of your letter, I'm hoping that your father's property hasn't closed and that it's under a listing contract until September 1, 2006.

Your dad is in a bit of a legal pickle, and Realty Times doesn't give legal advice, so we're calling upon Florida real estate attorney Hank Sorenson to answer your questions in a most general fashion and not as your counsel.

Sorenson explains, "Agency disclosures are required under Florida law as a protectionist measure for the public. As all real estate salespersons and brokers are considered "professionals" under Florida statutes, the legislature has mandated that certain disclosures shall be given the public concerning certain residential properties prior to taking on representation of the client. Those disclosures include a duty of honesty and fair dealing, accounting for all funds entrusted to the brokerage, and disclosing all facts that materially affect the value of the property."

"Under Florida law," he continues, "an agent is presumed to be working in a transaction brokerage relationship unless indicated otherwise in writing. Transaction brokerage differs from single agency in that the former has limited confidentiality and no requirement of obedience to the demands of the parties. These are legal terms for essentially saying that there is no fiduciary relationship between the agent/brokerage and the client in a transaction brokerage relationship, whereas there is one in a single agency relationship."

There is no requirement directly under Florida law to disclose a personal relationship with a party to the transaction, however, Florida statutes prohibit violating the above disclosures, which encompass duties of honesty and fair dealing, and using skill and care in the transaction, says Sorenson.

"Furthermore, the brokerage statutes prohibit an agent or broker from (a) making false, misleading or deceptive statements, (b) using a trick or scheme in providing their services, or (c) conducting activities that would be considered a breach of trust. If the agent informed the client that he would be working in the client’s best interest, and then the personal relationship was discovered, arguably the agent would have violated all of the foregoing requirements."

So your father's recourse would be to pursue these claims in front of the Florida Real Estate Commission. On the bright side, Florida law does not require the client to have actually suffered any economic damage, so it is immaterial as to whether or not the property was actually undervalued by the agent, given the agent’s conduct, Sorenson says.

Another course of action is to file an ethics complaint to your father's local board of Realtors. To find the proper board of Realtors, see associations on Realtor.com.

The reason for two courses of action is that real estate agents are licensed by the state. Realtors are not the same bird. They are real estate agents who have become members of the National Association of Realtors. In joining, agents agree to abide by the NAR's more rigorous Code of Ethics and Standards of Practice that Sorenson referred to above. In this case, the Realtor code is stronger than the state code of ethics.

"As an aside, an ethics filing in front of the local Realtor board may be proper, as there are several Realtor code provisions implicated by the agent’s conduct, including Article 4, which requires an agent to disclose certain personal relationships they have in transactions," suggests Sorenson.

As far as the value of your father's property goes, values can change monthly, but that doesn't mean fraud wasn't perpetuated. The best course of action would be to seek counsel with a real estate attorney that is knowledgeable on contracts, litigation, brokerage statutes and the realtor ethics code.

"Although a property owner is allowed in court to give their opinion as to the value of any property they own, the better practice to determine if the property was undervalued would be to hire an appraiser or knowledgeable broker to serve as an expert witness on the property value," says Sorenson. "This person would likely testify on the property owner’s behalf in a court proceeding against the agent and/or brokerage in establishing the negligence or fraud involved in valuing the property to establish damages."

Let us know what happens.

Published: June 15, 2006

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