Breach of Fiduciary Duty in Real Estate Transactions

In the real estate industry, agents and brokers have a legal duty to act in their clients’ best interests. When they fail to uphold this duty, it may constitute a breach of fiduciary duty, leading to financial losses and legal disputes. Understanding this legal concept is essential for buyers, sellers, and investors to protect their rights. Below, we explore key claims against real estate agents and brokers, as well as potential conflicts in dual agency situations.

Claims Against Real Estate Agents and Brokers

Real estate agents and brokers owe their clients fiduciary duties, including loyalty, disclosure, confidentiality, and due diligence. When an agent breaches these responsibilities, the client may have grounds to file a claim. Common breaches include:

• Failure to Disclose Material Information: Agents must disclose all relevant facts that could impact a property’s value or desirability. Concealing known defects, zoning issues, or pending legal disputes may be considered a breach.

• Misrepresentation or Fraud: Providing false or misleading information about a property, such as overstating its condition or underreporting market risks, can lead to legal liability.

• Negligence in Duty of Care: Agents must exercise reasonable skill and diligence. Failing to conduct proper market research, pricing properties inaccurately, or making careless mistakes can result in financial harm to clients.

• Conflicts of Interest: Agents must prioritize their clients’ interests above their own. If an agent engages in self-dealing or favors one party unfairly, they may be held accountable.

If a breach occurs, clients may seek compensation for damages, including lost profits, legal expenses, and even rescission of the transaction.

Dual Agency Conflicts

California law allows for dual agency, where one agent represents both the buyer and seller in a transaction. However, this arrangement carries significant risks and potential breaches of fiduciary duty.

• Limited Loyalty and Disclosure: A dual agent cannot fully advocate for both parties simultaneously. This limitation may lead to conflicts where crucial information is withheld to avoid disadvantaging either side.

• Compromised Negotiations: Since the agent earns commission from both parties, they may prioritize closing the deal over securing the best terms for their clients.

• Risk of Undisclosed Interests: If an agent fails to clearly disclose their role as a dual agent and obtain both parties’ written consent, they may be violating California real estate laws.

Given these challenges, individuals involved in real estate transactions should exercise caution when engaging in dual agency arrangements and seek independent legal advice when necessary.

Protecting Your Interests

If you believe a real estate agent or broker has breached their fiduciary duty, it’s crucial to take legal action to protect your financial interests. At Borna Law, we specialize in real estate litigation and fiduciary duty claims, ensuring our clients receive the justice they deserve.

For a consultation, contact Borna Law at (888) 42-BORNA or visit us at 2530 Wilshire Boulevard, 3rd Floor, Santa Monica, CA 90403.