By Dawn Brotherton
SAN FRANCISCO – Dual agency in real estate transactions is coming under scrutiny by the California Supreme Court.
The case could have huge ramifications in California, according to Rob Bello, an attorney with Hughes Marino.
Hiroshi Horiike v. Coldwell Banker is a case about dual agency. Horiike allegedly worked with a salesperson in a Coldwell Banker offer to purchase a Malibu property listed by another agent in a different Coldwell Banker office. Horiike received a flyer stating that the home had approximately 15,000 square feet of living property, but after the sale Horiike claims he learned that the home actually had about 11,000 square feet. Neither his agent nor the listing agent allegedly advised Horiike to hire anyone to verify the square footage of the property during the transaction.
Horiike sued Coldwell Banker and the listing agent, alleging that the listing agent had a fiduciary duty to him, because he was a client of the agent’s firm. The trial court disagreed; Horiike appealed. The appellate court said in its decision: “(T)he buyer contends that the salesperson had a fiduciary duty equivalent to the duty owed by the broker, and the trial court incorrectly granted the nonsuit and erroneously instructed the jury. We agree. When a broker is the dual agent of both the buyer and the seller in a real property transaction, the salespersons acting under the broker have the same fiduciary duty to the buyer and the seller as the broker.” Thus, the case was remanded for a new trial.
Coldwell Banker has requested a review of the case by the California Supreme Court. According to the Appellate Courts Case Information website, the case status is listed as “called and continued.”
According to the appellate court, “‘dual agent’ means an agent acting, either directly or through an associate licensee, as agent for both the seller and the buyer in a real property transaction.” The court cited Assilzadeh v. California Federal Bank: “[A] dual agent has fiduciary duties to both the buyer and seller.”
“Dual agency doesn’t comport with transparency in real estate transactions, but the industry is slow to change,” Rob Bello told the Northern California Record. “The buyer is generally much less experienced than the seller in any real estate transaction, which puts them at a disadvantage.”
Hughes Marino was instrumental in changing the commercial real estate climate with Senate Bill 1171, which took effect on Jan. 1, 2015. The law requires commercial real estate brokers to disclose their working relationship to their clients in any real estate transaction. Buyers and sellers are fully aware of who each party represents and who has a fiduciary duty to whom before the transaction even begins. However, this law doesn’t extend to residential real estate transactions.
“There’s an unconscious favoring of the person who will continue to give your agency or brokerage the business when these protections aren’t in place,” Bello said.
Hughes Marino wrote an amicus brief in support of Horiike, as did the National Association of Exclusive Buyer Agents (NAEBA) and other consumer protection groups in California.
“There should be a hearing in September, then the Supreme Court has 90 days to produce a decision,” Bello said. “We could have a decision by December.”
This article originally appeared in the Northern California Record.
Robert Bello is general counsel for Hughes Marino, an award-winning California commercial real estate company specializing in tenant representation and building purchases with offices in San Diego, Orange County, Los Angeles, San Francisco and Silicon Valley. Contact Robert at 1-844-NO-CONFLICT or firstname.lastname@example.org to learn more.