New York lawsuit calls dual agency deals into question

The suit by a White Plains homebuyer against Houlihan Lawrence could have broad implications for agents and brokerages that regularly represent both the buyer and sale-side of deals

A White Plains, New York, homebuyer has filed suit against Houlihan Lawrence, among the largest real estate brokerages in upstate New York, accusing the firm of “predatory behavior” through a legal practice known as dual agency that has come under increased scrutiny in recent months.

The homebuyer, Pamela Goldstein, alleged that only three days after submitting a $637,000 bid for the four-bedroom white colonial in White Plains did she learn the brokerage was also representing the seller and that her agent, Daniel Cezimbra, was the brother-in-law of a broker leading a team for the seller. Both men shared in the commission.

“This suit seeks to recover millions of dollars in sales commissions that homebuyers and sellers who were duped into dual-agent transactions paid Houlihan Lawrence for loyal representation that they didn’t receive,” said attorney Jeremy Vest in a joint statement with partner William Ohlemeyer.

“It also seeks to ensure that, going forward, no homebuyer or seller ends up in a dual-agent transaction without fully understanding the important rights they lose in that situation.”

Vest, who delivered a joint statement to Inman on Thursday, believes the case could have repercussions far beyond their client, herself the general counsel of a large communications firm, and are seeking to file a class action lawsuit on behalf of other former Houlihan Lawrence clients. For now, however, Goldstein is the only plaintiff in the case.

The brokerage, which boasts 1,300 agents across upstate New York and Fairfield County, Connecticut, represented both the buyer and seller in nine out of 10 of its biggest deals in Westchester in 2017 and, among home sales in Bronxville, a whopping 80 percent of all transactions in excess of $2 million were through dual agency, according to the lawsuit.

In court papers, Goldstein claims she was pressured by Cezimbra to act fast because other interested parties were lining up for a chance to purchase the home, and she was told to overbid for the property.

Three days after her initial bid, she was informed through a mandatory state form, as required by New York State law, of the dual-agency practice. The form, according to the Wall Street Journal in a story published Monday, was filled out incorrectly.

Dual agency is legal in New York State, but only under the condition that the agent receive “informed consent” from the buyer or seller — defined as “lay[ing] bare the truth, without ambiguity or reservation, in all its stark significance.”

Critics, however, argue that dual agency frequently opens the door to obvious conflicts of interest, and it becomes more complicated when it’s not a case of one broker representing both buyer and seller, but rather, a case of two brokers at the same firm working on the same sale from opposite sides.

In those cases, the firm itself is legally considered one, dually acting “agent,” and the degree to which the two brokers are collaborating on the sale is far less clear.

In June, the Canadian province of British Columbia banned the practice entirely, and in the United States, Colorado, Florida, Kansas and Wyoming prohibit dual agency. Other real estate experts believe it should be banned nationally.

“It’s like attorney-client,” Nathan White, of Link Real Estate Group, told Inman in June. “You can’t have an attorney represent the plaintiffs and the defendant neutrally. It’s great from a money perspective, but why are we allowed to do it?”

A spokesperson for Houlihan Lawrence on Thursday responded to Inman’s request for comment with a statement.

“A former client has filed a lawsuit against our company, and we deny allegations in the complaint,” wrote the Houlihan Lawrence spokesperson. “Houlihan Lawrence has been dutifully serving our clients for 130 years and is confident in our business practices. We will continue to represent our buyer and seller clients with integrity.”

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