Ann and William Manderville and their relatives Roseann and Rick Rinear sought to buy vacant land that could be subdivided to build two adjoining houses, one for each couple. Their buyer’s agent, Marilyn Fowler, found a property in the MLS (multiple listing service) described as “all useable 2.62 acres county states 1 acre min. lot size could be split.”

Fowler telephoned the listing agent, Russ Clark, to confirm the lot could be split. He said it could. Two days later, the buyers offered to purchase the lot for $235,000. The sellers accepted.

Purchase Bob Bruss reports online.

The purchase contract gave the buyers the right to investigate and inspect the property within 21 days. After the sale closed, the buyers learned from their civil engineer that the lot could not be split because the county had designated it “impact sensitive,” requiring a four-acre minimum lot size.

The buyers sued the listing broker for deceit (intentional misrepresentation). He pointed to the printed sales contract, which says the sellers did not guarantee the “condition” of the property.

At the trial, broker Clark argued the buyers had ample opportunity to inspect and investigate the requirements for lot splitting before the sale closed. He testified he had talked on the telephone “to the county” and was assured the lot could be split. However, he couldn’t remember if he talked with a man or woman.

If you were the judge would you rule the buyers can sue the listing broker for deceit although the buyers had an opportunity to investigate before closing the sale?

The judge said yes!

The buyers made it known to their buyer’s agent and the listing agent they wanted to purchase a lot that could be split so the two couples could build adjoining houses, the judge began.

Although the sales contract contained an exculpatory clause that said the sellers did not guarantee the condition of the property, he continued, the MLS listing and broker Clark’s statements to the buyers led them to believe the lot could be divided.

The fact the buyers had 21 days to investigate and inspect the property to verify whether it could be divided did not create a legal obligation to do so, the judge emphasized. The evidence presented at the trial indicates the broker intentionally misrepresented the lot, he noted.

Therefore, the exculpatory clause in the sales contract does not protect listing broker Clark from liability for deceit, and the buyers may proceed with their lawsuit for damages although they did not investigate before purchase if the lot could be split, the judge ruled.

Based on the 2007 California Court of Appeal decision in Manderville v. PCG&S Group Inc., 55 Cal.Rptr.3d 59.

(For more information on Bob Bruss publications, visit his
Real Estate Center
).

***

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