Real Estate Agents’ Duties of Care

POSTED BY Michael Morrison
Rachael Cederwall
22 September 2015

posted in Caselaw | Property Law | real estate agent | duty of care

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The High Court has recently confirmed that real estate agents owe important duties of care to their vendor clients. More particularly, to act in their vendor client’s best interests. That includes advising as to any obvious pitfalls in the agreement and drafting the agreement so that their vendor’s interests are protected.

In Messenger v Stanaway Real Estate Limited [2015] NZHC 1795 (case downloadable to the left), where the agreement required the vendors to provide very substantial vendor finance, the court has found that the agent should have properly advised her vendor clients as to the risks of when title to the property passed and whether they had adequate security for that part of the purchase price that remained unpaid. The agreement provided only that the vendors were entitled to lodge a caveat over the property, whereas the usual security for vendor finance would have been a registered mortgage.

The Court held that the Bayleys real estate agent breached her duty of care and is liable to the Messengers for the significant losses they suffered as a result, totalling some $2.3 million plus interest and costs. It was not sufficient for the agent to merely advise them that they should obtain legal advice, particularly in circumstances where the agent stood to earn commission of some $148,251 (plus GST).

Disclosure of Interest: Lowndes Jordan acted for the plaintiffs James and June Messenger in this proceeding.

Image courtesy of Mark Moz

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