Obligations and Liabilities That Arise in Real Estate Practice - Essay Example

? Critically discuss the professional obligations & liabilities that arise in Real E practice. You should consider how these duties arise and the interaction between them, illustrating your answer with appropriate references. Agent’s Obligations The real estate agent’s selling particulars are needed when a property is place on to the market under the provisions of the Estate Agency Act 1979 and such selling particulars should be ingenuous and should divulge all elements that have a say on the price offered. According to research study carried over by Reading University which has recognised that as a result of due diligence enquiries, about 30% of property transactions in UK are always bargained and this reveals that 30% of real agents in UK will always prefer to be not ingenuous as regards to the offer price of an asset.( Sayce et al :36). UK government control over property valuers is very limited and through the Estate Agents Act 1979 and through the Property Misdescriptions Act 1991, there is some control over the brokerage process. The 1991 Act was intended to thwart property development companies and estate agents from making deceptive statements about property. In actual parlance, both the above-mentioned Acts neither control the property valuation nor offers strong control over the process. (Sayce et al 2006:32). For doing the estate agency business in England and Wales, there is necessity to obtain any licence. However, a bankrupt cannot be a estate agent or if the Office of the Fair Trading declare that an individual is debarred from acting as an estate agent, if they had received many complaints about any individual about the style in which he might have carried out his business in the past.(Carter2008:262). The judge in Antonelli v Secretary of State for Trade and Industry,1997 employed his diplomacy regarding the elucidation of the word” violence” in the background of the Estate Agent’s Act 1979. The Director General of Fair Trading, under this Act, had the privilege to any individual “found guilty for an offence of involving any violence, other dishonesty or fraud from conducting the profession as an estate agent. (Wagner et al 2007:30). In Enfield LBC v Castles Estate Agents, it was held that the defendant advertisement for the house was not only misleading but also false. However, in appeal by the defendant to the Court of Appeals, the defendant argued that on having some doubts about the residential nature of the house, he enquired with the vendor who confirmed that he had obtained a residential permission for that house. The Court of Appeals held that the real estate agent chiefly focused on skill and his own experience in determining and the Court of Appeal found that it was wholly proper. Estate agents are under obligation not to make any false statement in their dealings. In McMeekin v Long1 , it was held that an estate agent should disclose the details of any dispute existing with an antagonistic neighbour and concealment of such information would result in false statement. An estate is under obligation not to involve in any misleading statement. In Atlantic Estates Plc v Ezekiel2, where a property auction details included a photo of exhibiting people leaving or entering a premise as a bar whereas in reality, the tenant’s licence was exhausted and the said property was no longer was used to run the cocktail or wine bar. In Gordon v Selico Co Ltd3, it was held that the action of a builder to cover up the signs of upcoming of dry rot just before advertising the property in the market was held to be false and misleading statement. Liabilities The main objective of the Property Misdescriptions Act 1991 was to establish a new kind of strict liability criminal offence emanating from statements made about property. Section 1(1) of the above Act states: “Where a deceptive or phony statement about a prescribed matter is made in the course of an estate agency business, the individual who made such statement shall be liable to be punished as an offence under this section.” Thus, a criminal punishment is available if misleading or deceptive statement is made and there is no necessity to prove by prosecution that any of the specific individual was suffered any loss by relying on such statement or hoodwinked by the misstatement. Under tort of negligence, a claimant may make a claim for loss suffered. In Hedley Byrne v Heller, due to negligent misstatements, if a person sustained loss by relying on such misstatement and then, he was authorised to file a claim for the economic loss sustained by him due to such misstatements. ( Hodgson & Lewthwaite 2007:119).Further , it is to be noted that meaning of “statement” included in section 1(5) (c) of the Property Misdescriptions Act 1991 not only contains spoken and written words but also includes pictures and any other mode of signifying meaning. In Lewin v Barrat Homes Ltd4, this principle was extended to both a photograph of a house and also a show house. The court opined that despite of warning messages attached to the photograph, the significance communicated by both the photograph and the show house was that it was the aim of the defendant developers to construct all Maidstone-type homes to the same design. The Divisional Court held that defendants were guilty of an offence under section 1 of the 1991 Act and the developer was convicted. As per Murdoch (1994), it would apparently include incorrect model of a “show-house”, or a new building which offers a phony sense of the benchmark of finish. (Murdoch 2003:219). A misrepresentation under Contract Act is to make one to believe a situation which is in contrast to a reality. A fraudulent misrepresentation is one where a statement is made knowingly it is false or with least respect for the truth. When some relies on a statement of fact (wrong fact), then misrepresentation occurs. A claimant may sue for damages suffered due to fraudulent misrepresentation under the Contract Act. (Miller & Jentz 2009::92). A surveyor was found to be accountable for negligence when he fell short to demonstrate adequate facts of new happenings in his profession which was held in Hooberman v Salter Rex (a firm)5. In Hedley Byrne & Co. Ltd v Heller & Partners, it was held that a duty of care would arise if a third party relied upon one’s special skill and such person should apply that skill in the respective work as desired by the third party and any deviance would be considered as failure to exhibit duty of care. Thus , a real estate agent should use his special skills and should make his client to feel happy as regards to services rendered by him else he would be liable to sued for damages either under tort or under Property Misdescriptions Act 1991. In Logicare Ltd v Southend United Football Club Ltd, it was held that any private interest of the agent which is not made known to the principal makes the agent disqualified. In Lowther v Lord Lowther,6 an agent should make frank and honest revelation of all information about the property which he knew about the property and if not, he will be held liable. Enfield LBC v Castles Estate Agents Ltd7 , the property was described as a 4 bed-room expanded semi-detached property with a one-bedroom bungalow and the magistrate’s court found that description of bungalow was misleading as it lacked the planning permission. (Scott et al 2000:315). Lancashire CC v Buchanan3, an estate agent released an advertisement about a house with a garden but it was latter known that there was no garden attached to it. A complaint was made against estate’s agent about misleading advertisement, the agent produced various documents adducing evidence that the garden was part and parcel of the property concerned with the house, but it seemed that the local officials were disagreeing for the registration of title. The Court observed in this case that the real estate agent had no commitment to get information about the legal title to the property. An real estate agent should exhibit realistic skill and care which will be looked into in the background of all the specific scenarios of the case. In case of professional negligence, the courts in UK may award heavy damages. In Brutton v Savill, Curtis & Henson8, due to mistake of a junior office employee of a real estate agent’s firm, a tenant was allowed to take possession of a property without paying any advance and latter, he defaulted rent payments. The court held it as negligence on the part of the real estate agent’s firm and asked to reimburse the loss sustained by the landlady. (Murdoch 2003:56). In Computastaff Ltd v Ingledew Brown Bennison & Garnett9, the estate agent quoted a low figure for the rateable value to a prospective buyer. The potential tenants who were apprehensive of the figure given, who consulted their own solicitor and real estate agent who failed to find out the error. It was held by the court that tenants were permissible to hold liable both their solicitors and their agents accountable for negligence and to recoup the damages the whole amount of the extra rates which they had paid during the occupancy. In Hunt v Beasley Drake, a probable buyer consented to pay commission to an agent provided that the agent should give an assurance that the advertised facts of the property were true and accurate. It was held by the court that having promised to check the seller’s property information, the agent was accountable for failing to do so. However, if there was no such an undertaking, the agent would not be anticipated to carry out this task. (Murdoch 2003:56). In GP & P Ltd v Bulcraig & Davis10, the court was of the opinion that an agent who was working for a probable client was under no duty to make a personal verification of the planning register to know about the allowable usage. It was enough if the agent had made a telephone call to the planning office as the client’s solicitor would be anticipated to make more formal inquiries. (Murdoch 2003:55). It was held in Holt v Payne Skillington11, if agents voluntarily advised the client as to the planning scenario, they would owe a duty of skill and care in so doing. In GP & P Ltd case, the real estate agent who entered into a contract with a client was held not accountable for information about allowable usage to customer as client’s solicitor was responsible for that and however, if a real estate agent makes an independent advice as regards to planning, he would be expected to show a duty of care as held in Holt case. In Carreras Ltd v D.E& J Levy12, the plaintiff asked the respondent to find out a suitable office accommodation and the respondent agent was held liable as he miscalculated and overestimated the aggregate floor area of the property which they advised. (Murdoch 2003:55). An estate agent was held accountable in Kenny v Hall, Pain & Foster, for overestimating negligently a client’s property. Based upon the agent’s estimate, the client availed bridge finance and bought another property and lost money and the deal had left him to the verge of bankruptcy. (Murdoch 2003:54). An estate agent who found to be guilty of negligence will be accountable to the client for whatever damage or loss which had occurred. In Dunton Properties Ltd v Cales , Knapp & Kennedy Ltd 13,the defendant were held accountable for the having failed to brief the plaintiffs about the present tenant who was about to buy that farm to resell at the earliest. (Murdoch 2003:54). In Hellings v Parker Breslin Estates [1994], the landlord wanted to have repossession of the premise at a time when he wanted to dispose it off. However, the estate agent did not reveal these facts to the tenant. In a recovery proceeding of the vacant flat, it was held that agent was liable as he failed to explain the scenarios where possession could have been made under the Case 11 of the Rent Act. In MaCauley v Bristol City Council, the defendant Council failed to carry out repairs when existing tenants reported a defective garden step. The client broke her ankle when she slipped in the defective garden stop. The tenant was awarded damages of ?4,500 as Council was held to be infringement of duty of care. Conclusion It is always advised that an estate agent should be unequivocal in his dealings with his principal or his client. An estate agent should be more vigilant when he deals with third parties. An estate agent may witness more trouble due to ambiguous and sloppy wordings in contracts especially when he deals with third parties or subagents. In UK, anyone can become a real estate agent as there is no minimum qualification and other norms to become a real estate agent and the lack of proper regulation and oversight of the real estate agent’s profession is really staggering. UK should also introduce a rigorous oversight regime is necessary in this area so as to guarantee integrity and professionalism in the style of property is sold and bought. All individuals who are now practicing the profession of estate agent should be asked to join compulsorily and to follow the rules set out by the RICS ( Royal Institute of Chartered Surveyors) which has great magnitude of professional norms and would ensure that clients interest are safeguarded. Many gullible UK citizens have been stung worst by estate agents functioning in a deceptive or incompetent manner. It is high time for the UK government to introduce compulsory licensing before practicing as estate agent. This would go long way in the development of estate agent’s profession as it would guarantee enhanced confidence on the profession by the public and would eschew away dodgy agents in operation. References Hodgson, J. & Lewthwaite. (2007) Tort Law Textbook, Oxford: Oxford University Press. Miller, RL. & Jentz, GA. (2009. Fundamentals of Business Law: Excerpted Case,. New York: Cengage Learning. Read More