Recently, in RSB Vineyards LLC v. Orsi, the First Appellate District Court of Appeal confirmed the long-standing rule in California: sellers must disclose all known material matters. While this affirmed rule was not surprising, the court was very helpful in providing the first detailed framework for what it means for a seller to have
It is well known that under California law a real estate broker may act as a “dual agent” for both the seller and the buyer in a property transaction, provided both parties consent to the arrangement after full disclosure. In such representation, a dual agent owes fiduciary duties to both buyer and seller. Pursuant to a recent case, Horiike v. Coldwell Banker, these fiduciary obligations have now been expanded to also apply to “associate licensees” acting on behalf of a brokerage firm (or the salespeople of the given brokerage firm, as they are more commonly known). In a unanimous decision, the court ruled that when an agent representing a seller is working for the same firm as the agent representing the buyer, they are considered an “associate licensee” and must properly investigate and disclose all important information related to the property subject to the transaction.
In Horiike, the seller and buyer of a luxury Malibu mansion were represented by separate real estate agents. However, both of these agents were acting under the license of a single brokerage firm, Coldwell Banker. The seller’s agent had reason to know that residence’s square footage was significantly different than what was represented in the sales material. The buyer purchased the property and began making renovations. Upon reviewing a building permit previously obtained by the prior owner, the buyer discovered that the property had thousands of square feet less living space than what was disclosed in the marketing materials. Coldwell Banker claimed that because the seller’s agent exclusively represented the seller, there was no fiduciary duty to disclose information relating to the square footage to the buyer. The California Supreme Court thought otherwise.