Real estate agents be warned! If you are ‘passing on’ information from the vendor to the buyer, you must ensure that information is correct, otherwise you could be held liable, writes Property & Commercial Partner, Barry ven Heerden.
Real estate agents’ liability when passing information along is high. We are aware of cases where agents are being charged with misconduct because the agent merely passed information he received from his vendor client to a purchaser which information later on appears to be incorrect.
In a court case in New Zealand (Red Eagle Corp Ltd v Ellis) the defence by an agent that he was “merely passing” on information received from his vendor client was discussed.
Sometimes agents pass the information on from the vendor or a third party and therefore act as a “mere conduit” in passing on the information. This is a valid defence by agents but there are limits to the defence. The Supreme Court has defined this defence as follows:-
“In order to be seen to be a “mere conduit” the conveyer of misleading or deceptive information must have made it plain to the recipient that he or she is merely passing on information received from another without giving it his or her own imprimatur – that is making it appear to be information of which the conveyor has first-hand knowledge.”
What should real estate agents do?
It is usually not easy to succeed with this defence and we always advise agents to at least attend to the following:
- Always advise buyers, preferably in writing, to conduct their own due diligence despite anything the agent told them
- When passing on information to buyers, put on record the information comes from the vendor (or other 3rd party) and confirm you as agent have no independent knowledge of the correctness of the information
- Be careful not to read pre-purchase reports (like a pest and building report) and then use the findings of the report in marketing the property
It also happens that vendors provide incorrect information to an agent who then passes this information on to an innocent buyer.
We are aware of a case where the vendor told the agent the building was compliant and approved by Council. Based on this information the agent advised the vendor to remove an “as is” clause in the Contract because such a clause may limit the value of the property.
As it turned out, the information was incorrect in that the building was not compliant or approved. The vendor was hit with a massive bill to get the building compliant and approved.
The vendor then filed a complaint against the agent for misconduct stating the agent was not supposed to suggest the removal of the “as is” clause in the Contract.
The Tribunal changed the charge to unsatisfactory conduct and stated there is an obligation on an agent to ensure information they receive from their client and pass that information on is correct.
Even though this may sound unfair it appears to be the current law and we therefore recommend agents always:-
- Check all information received from vendors and/or third parties relating to the property. Information they provided might not be correct.
- If the information is incorrect don’t market the property despite any instructions from the vendor to market the property.
- Always advise your client to obtain legal advice from a property lawyer before making any amendments to a Contract.