Real Estate Salesperson Owes Same Duty to Buyer and Seller When Broker Represents Both

A recent California decision found that a real estate salesperson representing a buyer or seller has the same duty as the broker who represents both the buyer and seller. This could happen when a broker represents both the buyer and seller but two separate salespersons actually represent the buyer and seller. In this case, both salespersons would owe a duty to the other party even if they are not acting as a dual agent because their broker is acting as a dual agent. Horiike v. Coldwell Banker Residential Brokerage Company provides guidance for real estate salespersons, brokers, and parties to a real estate transaction when the same broker represents both the buyer and seller.

In 2006, the property owners of a home in Malibu, California hired Chris Cortazzo with Coldwell Banker Residential Brokerage Company to sell their property. Building permits for the property listed the square footage of the buildings at 11,050 square feet, including a single family residence at 9,224 square feet, a guest house at 746 square feet, a garage at 1,080 square feet, and a basement. Cortazzo listed the property and advertised as having 15,000 square feet of livable space. A couple made an offer on the property but wanted confirmation of the building square footage, which could not be provided because architectural plans could not be provided.

The plaintiff, represented by another real estate salesperson, Chizuko Namba, from Coldwell Banker Residential Brokerage Company, made an offer on the property. He was provided a flier stating that there was 15,000 square feet of living space and was also provided a copy of the building permits. The parties also signed a dual agency disclosure form required under Civil Code Section 2079.16.

The form described two types of relationships relevant here:

  • The seller’s agent acts as an agent for the seller only and has a fiduciary duty in dealings with the seller. The seller’s agent has obligations to both the buyer and the seller to exercise reasonable skill and care, as well as a duty of fair dealing and good faith, and a “duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the parties.”
  • “A real estate agent, either acting directly or through one or more associate licensees, can legally be the agent of both the Seller and the Buyer in a transaction, but only with the knowledge and consent of both the Seller and the Buyer.” An agent in a dual agency situation has a fiduciary duty to both the seller and the buyer, as well as the  duties to buyer and seller listed in the previous sections.

Soon after the transaction was completed, the Plaintiff filed a lawsuit against Coldwell Banker for intentional and negligent misrepresentation, breach of fiduciary duty, unfair business practices in violation of Business and Professions Code section 17200, and false advertising in violation of Business and Professions Code section 17500. He had discovered the total square footage of the building was different from building permits or what was advertised.

On appeal, the Court found that the Listing Agent owed a fiduciary duty to the Buyer because he was employed by the same broker as the one representing the Buyer. A broker who represents both parties to a real estate transaction owes both parties a fiduciary duty even when different salespersons represent each party. If the Listing Agent was aware of material facts, he should have provided them to the Buyer.

There is a common misconception that if two different real estate salespersons represent the buyer and seller, there is no issue of dual agency even when both salespersons work for the same broker. California law does not agree. This case has important implications for real estate salespersons and brokers who deal with the seller and buyer to a real estate transaction.