Real estate agents’ broad duty of care discussed by Maryland federal court

In Lawley v. Northam, a case recently decided by the U.S. District Court for the District of Maryland, the court explored the scope of a real estate agent's liability for making material misstatements or omissions concerning a property for sale. Lawley v. Northam, 2011 U.S. Dist. LEXIS 37690 (D. Md. Apr. 5, 2011). In that case, the defendant was a real estate agent who represented the seller of a single family home in Worcester, Maryland. The plaintiffs, Mr. and Mrs. Lawley, were the daughter and son-in-law of the buyer, and were renting the house.

The Lawleys filed a complaint alleging that the real estate agent had failed to disclose material defects in the property relating to mold, asbestos, and water intrusion. The agent moved for summary judgment, asserting that she had no obligations to the buyer or to the Lawleys because she was not their agent -- she represented the seller. Therefore, she claimed she could not be held liable for economic loss suffered by the plaintiffs.

The court denied the motion, pointing to Maryland statutes and regulations which require real estate agents to disclose all material facts to any person with whom they conduct business. For example, one Maryland regulation imposes an affirmative obligation on real estate agents to avoid "error, exaggeration, misrepresentation, or concealment of material facts." COMAR 09.11.01.D. On the basis of these statutes and regulations, the court held that a seller's real estate agent does, in fact, owe a duty of care to the buyer and can be held liable for failing to disclose material facts. The court acknowledged that in this case the Lawleys were not the buyers of the property, but only rented the property from the buyer. However, the court found that the Lawleys were sufficiently involved in the real estate transaction to maintain a suit against the seller's agent.

On the other hand, the court was careful to point out that a real estate agent will only be liable for failing to disclose material information that she knew or should have known. If a real estate agent is unaware, through no fault of her own, of a material defect in property that she is trying to sell, she cannot be held liable for non-disclosure.

For advice on potential matters involving the liability of real estate agents in Maryland, contact Deborah M. Whelihan, Esq. at 703-246-0900.