§ 18.4 - The Broker's Duties to Clients

• Jurisdiction: Washington

§18.4 THE BROKER'S DUTIES TO CLIENTS

As discussed in §18.3, above, the traditional law of agency has been superseded by the adoption of Chapter 18.86 RCW, and the brokers' duties to their clients are governed by that statute. The duties imposed depend on whether the broker represents a seller, a buyer, both, or neither. However, because some of the statutory duties have been adopted from preexisting common law, case law interpreting those duties will still be relevant.

(1) Duties of all brokers

RCW 18.86.030 imposes certain nonwaivable duties on a broker who renders real estate brokerage services (defined as those activities for which a license is required) regardless of whether the licensee is an agent. These duties are as follows:

(a) To exercise reasonable skill and care;

(b) To deal honestly and in good faith;

(c) To present all written offers, written notices and other written communications to and from either party in a timely manner ...;

(d) To disclose all existing material facts [defined in RCW 18.86.010(9) and discussed below] known by the broker and not apparent or readily ascertainable to a party; .

(e) To account in a timely manner for all money and property received ...;

(f) To provide a [statutory] pamphlet on the law of real estate agency [at certain times] in a real estate transaction...; and

(g) To disclose in writing to all parties to whom the broker renders real estate brokerage services, before the party signs an offer in a real estate transaction handled by the broker, whether the broker represents the buyer, the seller, both parties, or neither party.

RCW 18.86.030(1)(a)-(g).

Unless otherwise agreed, a broker owes no duty to conduct an independent inspection of the property or to conduct an independent investigation of either party's financial condition, and owes no duty to independently verify the accuracy or completeness of any statement made by either party, or by any source reasonably believed by the broker to be reliable. RCW 18.86.030(2); Janda v. Brier Realty, 97 Wn.App. 45, 984 P.2d 412 (1999).

In Tennant v. Lawton, 26 Wn.App. 701, 706, 615 P.2d 1305 (1980), the court held that the duties of reasonable skill and loyalty required a broker to take reasonable steps to avoid disseminating false information to the buyer: "The broker is required to employ a reasonable degree of effort and professional expertise to confirm or refute information from the seller which he knows, or should know, is pivotal to the transaction from the buyer's perspective."

The Supreme Court in Hoffman v. Connall, 108 Wn.2d 69, 736 P.2d 242 (1987), differentiated between "negligent" misrepresentations and "innocent" misrepresentations, and refused to impose liability on a broker for repetition of information received from a seller that the broker otherwise had no reason to question. A broker need not be a guarantor of every statement made by the seller. Brock v. Tarrant, 57 Wn.App. 562, 789 P.2d 112 (1990).

A distinction can be made between a broker's rote repetition of physical data, such as boundary information obtained from a seller, e.g., Hoffman, 108 Wn.2d 69, and a broker's extrapolation from that data that a piece of property is "buildable," when septic permission had not in fact been obtained, e.g., Tennant, 26 Wn.App. 701, or that the property was suitable for commercial development when the parcel was not so suitable due to a previous landfill, e.g., Pac. Nw. Life Ins. Co. v. Turnbull, 51 Wn.App. 692, 754 P.2d 1262 (1988). The common-law rule is one of common sense: if the broker has any reason to question information received from the seller, he or she should try to verify it before passing it to the buyer.

(2) Additional duties of a seller's/buyer's agent

In addition to those duties described above, agents have additional duties to buyers or sellers as set out below.

(a) Both agents

If a broker is the agent for either the buyer or seller (in other words, agency has not been waived or the broker is not a dual agent), in addition to the duties set forth above, the buyer's/seller's agent has the following nonwaivable duties under RCW 18.86.040 and 050:

(1)	to be loyal to the buyer/seller by taking no action that is adverse or detrimental to the buyer's/seller's interest in a transaction;
(2)	to timely disclose to the buyer/seller any conflicts of interest;
(3)	to advise the buyer/seller to seek expert advice on matters relating to the transaction that are beyond the agent's expertise (note that in Jackowski v. Borchelt, 174 Wn.2d 720, 278 P.3d 1100 (2012), the Supreme Court suggests that such sduty may require a broker to proactively recommend that the buyer/seller retain expert advice on potential transaction issues rather than waiting for those issues to be raised by the buyer/seller before recommending outside advice); and
(4)	not to disclose any confidential information (defined in RCW 18.86.010(7)) from or about the buyer/seller, except under subpoena or court order, even after termination of the agency relationship.

In cases imposing the duty of loyalty prior to adoption of Chapter 19.86 RCW, failure to disclose virtually any close family relationship between the broker and the purchaser is a violation of the broker's duty to the seller. Mersky v. Multiple Listing Bureau of Olympia, Inc., 73 Wn.2d 225, 437 P.2d 897 (1968) (superseded by statute) (purchaser was selling agent's sister); Ross v. Perelli, 13 Wn.App. 944, 538 P.2d 834 (1975) (purchaser was selling agent's mother). A direct financial interest of a broker of any kind or nature in the purchased property or in the purchase itself, such as use of the earned commission for a participating share in the purchase, is prohibited without full disclosure. Meerdink v. Krieger, 15 Wn.App. 540, 550 P.2d 42 (1976); Frisell v. Newman, 71 Wn.2d 520, 429 P.2d 864 (1967); see also Girard v. Myers, 39 Wn.App. 577, 694 P.2d 678 (1985).

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