What ‘DeWolfe v. Hingham Centre Real Estate, Ltd.’ means for Mass. REALTORS

MAR Legal Staff put together a summary of this recent decision by the Massachusetts Supreme Judicial Court to answer questions Massachusetts REALTORS might have.

Court Cautions Brokers and Salespersons When Making Warranties and Representations about a Property

The Massachusetts Supreme Judicial Court (“SJC”) recently affirmed a 2011 Appeals Court decision ruling in favor of a buyer who had alleged that a listing broker misrepresented the zoning of the property he purchased. The case, DeWolfe v. Hingham Centre Real Estate, Ltd., reaffirms the principle that agents must exercise caution when making verbal or written representations about a property.

It is important to note that the Court declined to impose a duty on all real estate agents to verify the zoning classification and did not impose strict liability simply because the broker had made a misrepresentation about the zoning classification.  Instead, it applied the long-standing principle that a broker must use “reasonable care” when providing information about a property in order to avoid liability if the information is found to be inaccurate.

Key Facts

• The buyer was looking to purchase a property to relocate his business, a hair salon.
• Information provided by the listing broker (who stated that the information was obtained from the seller) indicated that the property was zoned as “Business B” and that “hairdresser” was among the permitted uses in that zone.
• The property was located in what appeared to be a residential area.
• After the sale, the buyer was unable to secure proper permits from the town necessary to open his business and was informed by the town that the property was, in fact, located within a residentially zoned area.
• He also learned that “Business B” was not a zoning designation in the town.
• The Court reviewed the facts of the case and ruled that the broker did make verbal and written representations about the zoning classification upon which the buyer relied to his detriment.
• Those representations turned out to be inaccurate.

The SJC ruling is not the end of the case.  It vacated the summary judgment entered by the superior court judge in favor of the broker.  The SJC ordered that the case be sent back to the superior court for further proceedings.  To avoid liability, the broker will need to prove that it had used reasonable care when passing along zoning information from the seller.

Caution Issued to Brokers

In finding against the broker, the Court decision serves as a caution for brokers and salespersons to use “reasonable care” when providing zoning information about a property in order to avoid liability. The standard of reasonable care applies to all claims for a negligent misrepresentation in Massachusetts (as well as to claims for violation of Chapter 93A based on a negligent misrepresentation), not just to zoning claims.  Provided that the broker has relied on information from a “reputable source,” and has no reason to believe that the representation is inaccurate, the broker will generally be found to have acted reasonably. Consequently, as a messenger, the broker will not be liable for an “innocent” misrepresentation.

In DeWolfe, the SJC stated that what constitutes “reasonable care” depends upon the circumstances presented and an evaluation of all factors.  The fact that the property was located within a visibly apparent residential area, and that the zoning designation did not actually exist, led the Court to rule that a reasonable jury could have found that the broker had not acted “reasonably” in relying on the seller’s assertions.

Steps to take to reduce your risk

As a real estate licensee, whenever you provide information to a buyer or seller on issues where there could be some level of uncertainty, it is always a good idea to:

• Identify the source of the information and encourage the buyer to perform his/her own due diligence and confirmation.
• Alert buyers to any discrepancy or inconsistency with any information you have.
• As an example, square footage calculations can lead to problems. Disputes over square footage calculations often arise due to conflicting calculations, or different standards, performed by the seller and buyer or the people they hire. It is recommended, but not required, that a broker who provides a square footage figure to a buyer should also let the buyer know where they received that information and encourage the buyer to conduct their own investigation.
• Brokers should also suggest that the parties consult with municipal departments or speak with their attorneys in order to resolve any question.