Who Pays for that Mistake?

July 21, 2013

Buying property can be a difficult task. Unless you know exactly what you want, just figuring out where to start can be overwhelming. It can be a harder task even after you find a property you prefer because it can be difficult to make sure you have enough information to make a good decision. This is where real estate agents, brokers and attorneys come in. Any of these people can be a great asset when searching for a property. The relationship between a buyer or seller and their chosen real estate person can vary and it is important that both sides are clear with their needs and expectations in order for a sale to be completed smoothly. Buyers and sellers enter into real estate transactions with various level of experience, therefore the duty of the real estate person may also vary.

Take for example the case of Salahutdin v. Valley of California, Inc. In this case, David Seigal (Seigal) is appealing a previous case against him, which he lost, regarding his actions as a real estate agent. Shaucat and Jeannie S. Salahutdin (the Salahutdins) sued Seigal because they believed he misrepresented a property which they ultimately purchased based on his recommendations. The Salahutdins wanted to purchase a home and land with the specific purpose of later separating the property and providing equal proportions to their two children. When searching for new property the Salahutdins explained their goal to Seigal and he in turn explained that the property had to be at least one acre in size for the Salahutdins purpose. The parties agreed to focus only on properties one acre and larger and Seigal soon found a property, Black Mountain, he felt fit the Salahutdins needs.

When the Salahutdins asked questions regarding the size of the property, Seigal affirmed that it was over an acre and therefore subdividable. Seigal received his information from the listing from the sellers' real estate agent. At no point before the sale of the property did Seigal independently verify the size of the property or inform the Salahutdins that he did not verify the information. There were no obvious indications the sellers' representation was incorrect. Also, at the time the property was placed on the market it was surrounded by a perimeter fence enclosing more than one acre. Therefore the Salahutdins took his word regarding the size of the property and chose to purchase it.

Approximately ten years after purchasing the Black Mountain property, a dispute arose between the Salahutdins and the Alcantaras, their neighbors, when the Alacantaras tore down the old fence and erected a new one several feet to the north. A survey confirmed the old fence was not the true boundary line between the properties. The area between the old and new fence constituted .08 acres meaning the Black Mountain property actually contained .998 acres. This led the Salahutdins to sue Seigal.

The first court found, and the second court agreed, that Seigal breached his fiduciary duty of care and committed constructive fraud by claiming the property was over one acre and divisible when it was not. Experts for the parties testified that if a real estate broker represented that a property could be subdivided, he or she had an obligation to investigate and determine if the property could in fact be subdivided. Because brokers have a fiduciary duty to their clients, the Salahutdins had the right to rely on his suggestions without further investigation on their part. Seigal did not independently determine the size of the property or inform the Salahutdins of his lack of action. Therefore the courts found him at fault for the Salahutdins loses and they were compensated for the breach of duty.

Purchasing real estate can be a stressful experience. If things do not go as expected, discussing your experience with an attorney may be beneficial to disuss your rights and options. If you have a real estate issue and feel you may need lega help please contact our office.