How Do You Prove A Real Estate Agent’s Breach Of Fiduciary Duty?

First, we have to figure out if a real estate agent is a fiduciary—just saying they are doesn’t make them so, and not every relationship is a fiduciary relationship. The relationship of an investment manager to their customer, who is investing their retirement savings, is a fiduciary relationship. In contrast, courts have held that the relationship between a bank and the borrower of a loan that will be used to purchase real estate is not fiduciary. The bank doesn’t have any obligation to go out and inspect the property or determine whether the price that is being paid is the right price or that the customers, five years down the line, will be able to make their payments.

When it comes to real estate, the relationship between a potential or actual buyer and their real estate agent is a direct relationship, meaning the real estate agent has certain duties. The buyer’s relationship with the seller’s agent, on the other hand, is not fiduciary. Though the law imposes certain obligations for the agent on the seller, they are far less than what a fiduciary is obligated to do and learn about their customer.

The fiduciary duties for the buyer’s agent include something as simple as not taking money that has been entrusted to the agent, or perhaps put into an account at the brokerage. If the real estate agent does not do a thorough job of inspecting or looking into the property, it will depend on what was agreed upon between the customer and the real estate agent whether they’ve breached their duty. There are listing agreements and other kinds of written agreements that will typically be entered into between the customer and the real estate agent. I can’t, without looking at the contract, say whether there is a fiduciary duty or not a fiduciary duty for something like the real estate agent doing an inspection or hiring a geologist.

Let’s say the agent doesn’t do that and the customer purchases the property and subsequently, after escrow is closed, learns about a problem with the geology (or some issue where there will be expenses to bring the property up to proper building code compliance). In that circumstance, we would have to look at the contract for evidence of what the agent did or didn’t do, and that is typically going to be documentary. There may be witnesses involved, but documents are often at the heart of that investigation.

What Remedies Are Available For A Real Estate Agent’s Breach Of Fiduciary Duty?

For any breach of fiduciary duty, economic damages and, in rare cases, non-economic damages may be recoverable, depending on the circumstances. We typically deal with economic damages like expenses, loss of value, money spent hiring experts like geologists, and costs incurred in the lawsuit. Then, depending on whether there was a written contract and what that contract says, the plaintiff could recover attorney’s fees in the event of a lawsuit in which they succeed.

Does It Always Make Sense To Sue For Breach Of Fiduciary Duty?

It’s something that should be looked at in terms of whether it’s going to be a strong claim based on the facts. My philosophy is that I don’t want to just throw everything against the wall to see what sticks. I like to focus and represent the client on the strongest possible claims. I don’t like filing lawsuits where there are 28 claims and 26 of them are not going to be able to be proved. That just wastes time and money, and involves us going through the process of asking questions when we already know the answers aren’t going to support the claims.

Breach of fiduciary duty may or may not be the strongest claim. In a situation, for example, where you have an elderly client who is dependent on getting advice about what to purchase or how much to pay from an expert like a real estate broker, it might make much more sense to pursue a breach of fiduciary duty claim as opposed to just a standard home purchase situation. Again, it depends on the situation. We’ll look carefully at the breach of contract theory, fraud theories, and other kinds of theories and causes of action or claims to help us determine what makes the most sense for the client.

For more information on Breach of Fiduciary Duty in the State of CA, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (310) 477-7767 today.