CALIFORNIA FOCUS
FOR RELEASE: FRIDAY, JANUARY 13, 2017, OR THEREAFTER
FOR RELEASE: FRIDAY, JANUARY 13, 2017, OR THEREAFTER
BY THOMAS D. ELIAS
“KEY COURT DECISION GIVES HOME BUYERS NEW PROTECTION”
No industry is more vital to the
finances of vast numbers of Californians than real estate. With homes and
buildings the largest assets of millions of families in this state, it’s vital
the agents and brokers who buy and sell property do so with integrity.
That means telling buyers all known
flaws in any home or building they’re considering. It means giving them honest
information about square footage of buildings and land. It means refusing to
drive client buyers into panicked situations where they become so desperate
they bid far above appraised values and asking prices.
That’s common practice for most
brokers, but sometimes has gone by the wayside in deals where the same agent or
brokerage company represents both buyer and seller.
Such breaches of what should be common
sense ethics have now drawn the ire of the state Supreme Court in a decision
based on California’s state constitution, not the federal one that’s usually interpreted
by the U.S. Supreme Court in ways that favor businesses over consumers. So any
appeal from it by large brokerages would likely prove fruitless.
The decision in a case known as Horiike v. Coldwell Banker, handed
down late last fall and overshadowed in news coverage by post-election turmoil
and President-elect Donald Trump’s transition process, may be the most
important from the state high court in decades.
That ruling stemmed from millions of dollars worth of omissions
held back from a Hong Kong businessman who in 2007 purchased a beachfront
Malibu mansion with sweeping ocean views for $12.25 million. Two years later,
he learned the four-bedroom, 5.5-bath house he thought contained 15,000 square
feet actually held less than 10,000 – more than one-third under what he’d been
told.
Hiroshi Horiike spoke only Chinese and Japanese and felt fortunate when he found an
agent who could communicate with him in Japanese. He didn’t know it was
important that the seller was also represented by another agent of the same
brokerage.
The agent for the seller, court papers said, used public records
to learn that the manse actually had a living area of 9,434 square feet, plus a
guesthouse, a garage and a basement that brought the total area to
“approximately 15,000 square feet of living space,” as one listing for the
property put it. At a showing, the agent gave Horiike a flyer advising in small
print that “Broker/Agent does not guarantee the accuracy of the square
footage.”
When he got a building permit for some remodeling two years later, Horiiki noticed a
lower square footage number and sued the brokerage, which had a legal duty to
pursue the best interests of the buyer as well as the seller, because both
agents worked for the same company.
It took more than seven years for the
case to be decided in Horiike’s favor by the state’s highest court, which set a
precedent for all other cases where agents from the same brokerage represent
both buyer and seller.
The ruling means Horiike, whose damage
claim against both the seller’s agent and the brokerage, can return to trial
court, where his case was rejected years ago. Now he’ll be able to seek
millions of dollars in both actual and punitive damages because the house he
bought was not even two-thirds as large as advertised.
Others who feel similarly wronged or
deceived will also be able to sue. But the decision still leaves agents and
brokerage firms able to legally represent both buyer and seller in any given
transaction. They merely have to disclose all the information they possess to
the buyer, amazingly not previously of their obligations.
This obvious-seeming duty may create
new paperwork for agents, who will probably have to give more details than
before to prospective buyers. But it also offers large new protections to home
buyers across California, who often use proceeds from selling one house to buy
another.
It will assure more honesty not just
when billionaires buy mansions in Malibu or Marin County, but also for buyers
of far smaller homes in Fontana, Redwood City, Madera, Auburn and every other
California locale.
It’s a bit of relief in an era when
almost every appeals court and regulatory agency favors business interests over
the customers they’re supposed to serve.
-30-
Email
Thomas Elias at tdelias@aol.com. His book, "The Burzynski Breakthrough,
The Most Promising Cancer Treatment and the Government’s Campaign to Squelch
It," is now available in a soft cover fourth edition. For more Elias
columns, visit www.californiafocus.net
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