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AGENT ACCOUNTABILITY AND LIABILITIES

AGENT ACCOUNTABILITY AND LIABILITIES. Presented By: Instructors: Andrew Treuting & David Vicknair. About Your Instructors. Andrew Treuting Title Stream, LLC Smith & Treuting, LLC, Attorney at Law David Vicknair Scott, Sevin & Vicknair. COURSE OBJECTIVES.

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AGENT ACCOUNTABILITY AND LIABILITIES

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  1. AGENT ACCOUNTABILITY AND LIABILITIES Presented By: Instructors: Andrew Treuting & David Vicknair

  2. About Your Instructors • Andrew Treuting • Title Stream, LLC • Smith & Treuting, LLC, Attorney at Law • David Vicknair • Scott, Sevin & Vicknair

  3. COURSE OBJECTIVES • Identify situations that create liability for agents and their clients • Discuss the ways to avoid or minimize agent and client exposure

  4. LEGAL DUTIES OF AGENTS • La R.S. Title 9 arts. 3891 - 3899 • La R.S. Title 37, Chapter 17 – Louisiana Real Estate License Law

  5. DUTIES TO CLIENTS • Perform the terms of the brokerage agreement with client • Promote the best interests of the client by: • Sticking to the agreed upon terms • Timely presenting all offers to and from client • Timely accounting for all client’s money and property received • Exercise reasonable skill and care

  6. DUTIES TO CUSTOMERS • Treat customers honestly and fairly

  7. REAL ESTATE AGENT LIABILITY • 2 WAYS TO INCUR LIABILITY WHEN ACTING AS AN AGENT: • FRAUD (INTENTIONAL MISREPRESENTATION) • NEGLIGENT MISREPRESENTATION

  8. LSA-C.C. Art. 1953 - FRAUD • An intentional misrepresentation or a suppression of the truth • Done to obtain an unjust advantage or cause a loss to the other party • May result from silence or inaction

  9. NEGLIGENT MISREPRESENTATION • LSA-C.C. art. 2315 - Every act whatever of man that causes damage to another obliges him by whose fault it happened to repair it • Occurs when there is a legal duty to supply correct information and a breach of that duty results in damages --- detrimental reliance

  10. FALSE INFORMATION • Not liable to a client / customer unless the licensee knew or should have known it was false

  11. Detrimental Reliance • A party may be obligated by a promise when he knew or should have known that the promise would induce the other party to rely on it to his detriment and the other party was reasonable in so relying. • Recovery may be limited to the expenses incurred or the damages suffered as a result of the promisee's reliance on the promise.

  12. CASE STUDIES

  13. Duplechin v. Adams, 665 So.2d 80 (La.App. 1st Cir. 1995) • Buyer of sinking house sues seller and listing agent under redhibition, fraud and negligent misrepresentation • Testimony established that the sinking was apparent through multiple cracks, swinging doors, etc… • Agent “glossed over” the problems

  14. Duplechin v. Adams, 665 So.2d 80 (La.App. 1st Cir. 1995) • “In order for a plaintiff to recover for negligent misrepresentation, there must be a legal duty on the part of the defendant (agent) to supply correct information, a breach of that duty, and damage to the plaintiff caused by the breach.” • Agent owes a specific duty to communicate accurate information to the seller and purchaser

  15. Hancock v. Lauzon, 161 So.3d 957 (La.App. 2nd Cir. 2015) • Suit for negligent misrepresentation regarding in connection with property disclosure portion due to backyard flooding • Question: Was flooding an “apparent” or “redhibitory” defect • Question: Was disclosure of a sump pump in MLS adequate?

  16. Hancock v. Lauzon, 161 So.3d 957 (La.App. 2nd Cir. 2015) • “Where the alleged misrepresentation of a real estate agent to a buyer relates to defects which are apparent and discoverable on simple inspection, and where the buyer inspects the property before the sale, the buyer cannot complain of fraud or negligent misrepresentation”

  17. Cormier v. Coldwell Banker, 150 So.3d 557 (La.App. 3rd Cir. 2014) • Suit against listing agent (RELO) for failure to disclose accurate property acreage and “knowingly misrepresenting the boundary lines” • Recovery sought based on detrimental reliance • Duty to disclose…extends only to those defects (issues) of which the agent is aware

  18. Louisiana Warranties

  19. Implied Warranty of Merchantability • Property can be sold or mortgaged in the ordinary course of business by reasonable persons familiar with the facts and questions involved • Title is not suggestive of litigation

  20. SALE WITH WARRANTIES • “The SELLER and the BUYER acknowledge that this sale shall be with full SELLER warranties as to any claims or causes of action including but not limited to redhibition pursuant to Louisiana Civil Code Article 2520, et seq. and Article 2541, et seq.”

  21. Warranty Against Redhibitory Defects • A hidden defect that renders the thing useless or so inconvenient that buyer would not have bought it or would have paid less • Gives rise to rescission of sale or reduction of the price

  22. Apparent Defects • No call in warranty if defect is known or easily discoverable by a reasonably prudent buyer

  23. Thing Fit for Ordinary Use • When the seller has reason to know the particular use the buyer intends for the thing, or the buyer's particular purpose for buying the thing, and that the buyer is relying on the seller's skill or judgment in selecting it, the thing sold must be fit for the buyer's intended use or for his particular purpose.

  24. Prescriptive Period • If seller knew of the defect, one year from the date of discovery by the buyer • If seller did not know, one year from the date of delivery of the property

  25. Liability of Seller – LSA-C.C. art. 2345 • A seller who knows that the thing he sells has a defect but omits to declare it…or declares that the thing has a quality that he knows it does not have is liable to buyer for: • return of the price with interest from the time it was paid • reimbursement of the reasonable expenses incurred for the sale and preservation of the thing • Other damages • reasonable attorney fees.

  26. Liability of Seller – LSA-C.C. art. 2345 • A seller is deemed to know that the thing he sells has a redhibitory defect when he is a manufacturer of that thing

  27. WAIVER OF IMPLIED WARRANTIES • Must be written in clear and unambiguous terms • Must be contained in the sale document • Must be brought to the attention of the buyer or explained to him

  28. SALE “AS IS” WITHOUT WARRANTIES • The SELLER and the BUYER hereby acknowledge and recognize that the Property being sold and purchased is to be transferred in “as is” condition and further the BUYER does hereby waive, relieve and release the SELLER from any claims or causes of action for redhibition pursuant to Civil Code Article 2520, et seq. And Article 2541, et seq. or for reduction of Sale Price pursuant to Louisiana Civil Coe Article 2541, et seq.

  29. SALE “AS IS” WITHOUT WARRANTIES • Additionally, the BUYER acknowledges that this sale is made without warranty of fitness for ordinary or particular use pursuant to Louisiana Civil Code Article 2524. The SELLER and BUYER agree that this clause shall be made a part of the Act of Sale.

  30. PROPERTY SOLD “AS IS” • Simply saying that the property is being sold “AS IS” is not enough • “AS IS” waiver in LA contract effectively waives all implied warranties except title

  31. Limitations on “As-Is” Waiver • Purchaser must show fraud to defeat the waiver • Fraud carries tremendous burden of proof

  32. RECALL LSA-C.C. Art. 1953 - FRAUD • An intentional misrepresentation or a suppression of the truth • Done to obtain an unjust advantage or cause a loss to the other party • May result from silence or inaction

  33. CASE STUDIES

  34. Creger v. Robertson, 542 So.2d 1090 (La.App. 2nd Cir 1989) • Suit in redhibition for reduction of purchase price for “soiled” carpet • “A sale made “as is” is not a waiver of all warranties” • “A buyer is only under a duty to make an inspection which is reasonable in light of all the circumstances…”

  35. Batt v. Cohen, 139 So.3d 1284 (La.App. 4th Cir 2014) • Suit in redhibition by dentist against seller of commercial office space • Illustrates the importance of a solid waiver

  36. Louisiana New Home Warranty Act (NHWA) LSA-9:3141, et seq.

  37. NEW HOME WARRANTY ACT • The NHWA promotes commerce in Louisiana by providing clear, concise and mandatory warranties for the purchasers and occupants of new homes in Louisiana,” • Sets out “the exclusive remedies, warranties, and peremptive periods as between builder and owner relative to home construction

  38. Warranty Commencement Date • The date that legal title to a home is conveyed to its initial purchaser or the date the home is first occupied, whichever occurs first.

  39. One Year Following Commencement Date • Home will be free from any defect due to noncompliance with the building standards or due to other defects in materials or workmanship not regulated by building standards

  40. Two Years Following Commencement Date • The plumbing, electrical, heating, cooling, and ventilating systems exclusive of any appliance, fixture, and equipment will be free from any defect due to noncompliance with the building standards or due to other defects in materials or workmanship not regulated by building standards.

  41. Five Years Following Commencement Date • The home will be free from major structural defects due to noncompliance with the building standards or due to other defects in materials or workmanship not regulated by building standards.

  42. Major Structural Defects • Physical damage to the following designated load-bearing portions of a home caused by failure of the load-bearing portions … to the extent the home becomes unsafe, unsanitary, or is otherwise unlivable: • Foundation systems and footings • Beams • Girders • Lintels • Columns • Walls and partitions • Floor systems • Roof framing systems

  43. What’s Not Included? • Fences, landscaping, off-site improvements, all driveways and walkways, or any other improvement not a part of the home itself. • After the first year, the concrete floor of a basement and the concrete floor of an attached or unattached garage that is built separate from a foundation wall or other structural element of the home

  44. Case Study

  45. Shaw v. Acadian Builders and Contractors, LLC, (La. Sup. 12/10/13) • Buyer sues builder under NHWA for water damage due to failed stucco? • What constitutes “major structural defect”?

  46. Louisiana Private Works Act LSA-R.S. 9:4801 et seq.

  47. The Private Works Act • Allows persons who perform work or supply labor or materials in connection with the improvement of real estate to sue the owner and contractor for amounts owed • Allows a lien or privilege against the property to secure the claim against the owner

  48. Who is entitled to the Privilege? • General and Subcontractors • Laborers or employees of the owner • Suppliers and Materialmen • Lessors and sellers of movables used at the site • Consultants (engineers, surveyors, architects)

  49. Prescriptive Period for the lien • Suit to enforce lien and lis pendens must be filed within one year f filing the lien

  50. When does the lien period start? • Starts the moment work is performed or material is provided. • “A work is a single continuous project for the improvement, construction, erection, reconstruction, modification, repair, demolition, or other physical change of an immovable or its component parts.”

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