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Broker Beware

According to the Supreme Judicial Court, a real estate broker must "exercise reasonable care" not only in making representations about a property, but also in determining whether to rely on a seller's information about that property. See DeWolfe v. Hingham Centre, Ltd., 464 Mass. 795, 796 (2013). After roughly four years of looking, the Plaintiff in DeWolfe, a professional hair stylist, found a property he liked, thanks to newspaper and MLS listings by the sellers' broker. Id. at 796-98. The broker advertised the property as zoned with a "Business B" designation, which would permit "hairdresser" as a use on the scale Plaintiff anticipated. Id. Shortly after the conveyance, however, Plaintiff learned the property in fact was zoned "Residential B," a designation permitting perhaps a small, home-based hairdressing business but not the six-station hair salon Plaintiff had planned to establish. Id. at 798.

Plaintiff sued the sellers and the broker for negligent misrepresentation and violations of c. 93A, but the defendants prevailed on summary judgment. Id. at 798-99. The broker argued that she had no duty to investigate and confirm the sellers' representations to her about the property's zoning before communicating those representations to Plaintiff and, additionally, a clause in the purchase and sale contract for the property protected her from liability. Id. at 800. On appeal, the Supreme Judicial Court disagreed, noting first that reliance upon a seller's representations does not insulate a broker from all liability. See id. In evaluating a buyer's negligent misrepresentation claim, the "critical question" instead becomes whether the broker exercised reasonable care "in obtaining or communicating the information." Id.

Refining that question further, the SJC identified a broker's "duty to investigate further before conveying such information to prospective buyers" when it is "unreasonable under the circumstances for a broker to rely on information provided by the seller." See id. at 801. In, DeWolfe, the sellers had told the broker that the property was zoned "Residential Business B" - a designation that did not exist in their town - so the broker instead advertised the property as being zoned "Business B." Id. at 802. The broker had no knowledge of prior business use of the property, and only residential properties were adjacent to it on either side. Id. On these facts, a judge or jury "could find that [the broker] was on notice that the information [the sellers] provided... might be unreliable, and that [the broker] acted unreasonably in representing the property as zoned 'Business B' without first conducting further investigation." Id. In other words, something approaching the age-old warning "buyer beware" applies to brokers as well. 

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