Real Estate Brokerages are Accountable

Posted by Juanita Limes on Sunday, March 9th, 2014 at 8:07am.    805 Views

Brokers are Accountable for Agent Actions

Buyers and sellers unfamiliar with the world of real estate may not understand the affiliation between an agent and a brokerage.

Ohio real estate lawAll states are a little different, but a would be Ohio Realtor must be sponsored by a brokerage to attend real estate "college" and classes. Once an agent has completed the required courses and passed the mean exams for both State and National requirements, their license is on file with brokerage, and should they switch brokerages the license is transferred. The same for those getting out of real estate practice temporary or otherwise, the license is transferred back to the state of Ohio. 

When there's been some gross negligence, or let' say an agent broke confidentiality or fair housing law, and seller or buyer is harmed, the buyer or seller can hold the broker accountable, and why brokers carry Errors and Omissions Insurance, though some brokers require agents to pay all or part of the premium.

I came across an interesting case posted by the National Association of Realtors, (NAR) in Tennessee where at first, the managing broker was off the hook, but the buyer appealed and won:

  • In Crumpton v. Grissom, a Tennessee appellate court found that a managing broker ("Managing Broker") could be held accountable for the misrepresentations and negligence of an affiliate broker ("Affiliate Broker"), even though the Managing Broker was not personally involved in the transaction.
  • After closing on a mixed-use property, plaintiff Reid Crumpton ("Buyer") discovered that a five year non-compete clause in an addendum to the real estate sales contract had been excluded from some signed copies of the contract. The non-compete clause affected Buyer's ability to conduct his business on the premises. Buyer sued Affiliate Broker and Managing Broker, alleging that Affiliate Broker had made misrepresentations and been otherwise negligent in regard to the sales contract, and that Managing Broker had breached her duty to supervise the Affiliate Broker in the transaction.
  • The trial court entered summary judgment in favor of Managing Broker, holding that she had no knowledge of the substance or details of the transaction, and that "neither Tennessee statutes nor Tennessee case law suggests that managing brokers' duty to supervise their affiliates can create liability on the part of the managing broker where the managing broker has no direct involvement with or knowledge of the transaction."
  • Buyer appealed the trial court's ruling, and the appellate court reversed and assessed the costs of the appeal against the Managing Broker. In its opinion, the appellate court stated that under the Tennessee Real Estate Broker License Act, it is the unambiguous duty of a managing broker to ensure that her subordinate licensees "conduct their business in accordance with appropriate laws, rules, and regulations." In this case, held the appellate court, Managing Broker had clearly owed such a duty to Buyer, and had failed to produce any evidence that she had satisfied this duty.
  • In short, stated the appellate court, the trial court's erroneous ruling would, if put into practice, allow managing brokers to avoid their statutory duties "by simply and purposefully remaining ignorant of the substance and details" of a subordinate licensee's transactions.

Berkshire Hathaway, Quality Brokerages and Skilled Realtors

Personally, I'm glad that my brokerage, Berkshire Hathaway HomeServices Professional Realty offers amazing continuing education, Realtor discussion forums and resources. You can't work here  and conduct real estate practice without learning something weekly, and our management is always available to Realtors to help with difficult transactions.

 

Juanita Limes - Your Greater Dayton Area Ohio Realtor - Give me a shout for all your real estate needs,

937-776-6903 or just email me.

Leave a Comment