by Chad Wenzelspratt & Lee Santos
There are risks associated with giving advice beyond what you are licensed to do. Here is a real-life case study of a real estate agent who experienced the legal consequences of practicing outside of his specialty.
Agent Sued for Providing Legal Advice Without a License
A real estate agent was working with buyers in the market for a home in a wooded, suburban setting. The buyers visited numerous properties and eventually entered into a purchase agreement in a subdivision subject to restrictive covenants, conditions, easements, and limitations. The property closed two months later.
While reviewing the restrictive covenants with his clients prior to the sale, the agent misinterpreted the covenants and determined it would be okay to remove the trees. After the buyers moved in, they immediately cut down a buffer of trees near the rear of the property to improve their view of the nearby mountain.
The homeowners association had restrictive covenants requiring written approval by the board for the removal of certain vegetation. After the homeowners cut the trees, the adjacent neighbors filed an emergency Motion for Temporary Injunction with the court asking to instruct the buyers to cease and desist from further removal of the trees and declare they failed to comply with the restrictive covenants.
The buyers sued the real estate agent in response, alleging he provided legal advice without a license and breached the standard of care owed by a real estate professional.
They also alleged that he failed to recommend a consultation with a real estate attorney. When the agent admitted to his broker that he committed an error in judgment, the lawsuit was resolved for the cost of replanting new trees and a payment to both his clients and neighbors who later claimed diminution of property value.
Avoid the Same Trouble
Real estate agents or brokers who give legal advice may be sued for their actions. While you can complete the blanks of a preprinted sales agreement, you may neither draft your own documents nor give legal advice.
Chad Wenzelspratt, CIC, is a senior account executive for Pearl Insurance, a Texas REALTORS® errors and omissions risk-management partner.
Lee Santos is senior claim specialist-director of account management at XL Catlin.