Real Estate Broker Could Be Held Liable for Agent's Fraudulent Actions

In a recent case in Florida, a buyer in a residential real estate sale initiated a fraudulent nondisclosure lawsuit against the seller and the seller’s real estate broker.  The seller in this case was also his own real estate agent and he was affiliated with the real estate broker.  The seller completed the disclosure worksheet indicating that he had no knowledge of any defects in the home.   After closing, the buyer discovered many defects materially affecting the value of the property, which were not readily observable and not known to the buyer.  The buyer initiated an action against, among others, the seller and the real estate broker with which the seller was affiliated.  The trial court awarded summary judgment to the real estate broker. 

On appeal, the Fourth District Court of Appeal reversed the summary judgment in favor of the real estate broker, holding that the broker could be held liable to the buyer, as principal to the real estate agent, for actions by the real estate agent even where the agent’s conduct is fraudulent or deceitful.  According to the Fourth District, when the seller replaced his seller’s hat with that of a real estate agent, his knowledge about the condition of his home remained the same.  He had a duty to disclose all known facts to the buyer that materially affected the value of the property which are not readily observable.  The appellate court rejected that the real estate broker’s argument that the real estate agent was acting outside the scope of his employment because he was engaged in fraudulent conduct.  The appellate court relied on other Florida cases which held that the seller’s conduct fell within the scope of the real estate agent’s employment, even where the real estate agent’s acts or representations are fraudulent, if it is motivated, at least in part, by a purpose to serve the real estate broker.  After reviewing the record, the appellate court concluded that if the seller withheld information this was done during his work as a real estate agent to facilitate a sale, which was in the interest of the real estate broker, who would earn a commission.  Accordingly, the real estate broker could be liable for the agent’s fraudulent conduct. 

Goodman v. Rose Realty West, Inc., 2016 WL 2744975 (Fla. 4th DCA 2016).

For more information on this topic, contact Lori A. Heim at lheim@bushross.com or (813) 204-6444, or Yolyvee Y. Gordon at ygordon@bushross.com or (813) 204-6447.