By Robert S. Kutner, esq. Partner, Casner & Edwards
You get a new listing signed. Immediately you begin to market the property. The house is properly priced, and you receive a great response at the open house. More than 20 people viewed the home during two hours on a rainy Sunday afternoon. At least two young couples want to schedule follow-up visits. You immediately apprise the sellers, but are stunned when they angrily reply that they want to cancel your listing. On the evening of the open house, the sellers discovered that several medications are missing, as are a pair of diamond earrings. Not only do they want to cancel your listing, but also they want you to pay for their loss. Are you liable? What could you have done to prevent the thefts? Does the disclaimer provision in your listing agreement protect you?
Are You Protected?
Brokers are not automatically liable for losses. They are not required to be security guards or insurers of the sellers’ possessions. For a broker to be liable to the sellers for a theft, the same legal standards apply as for other civil claims. The burden of proving liability is on the person making the claim. The sellers must prove either: (1) that the theft was committed by the listing broker or one of its agents, or (2) that the negligence of the listing broker was a cause of the loss. If there are no witnesses and multiple persons had access to the property, it will be very difficult for the sellers to win their case. Even though proof of liability will be difficult, it is wise for the listing agent to take precautions to reduce risk. Including a disclaimer of liability in a listing agreement will deter many sellers from asserting a claim, but a disclaimer will not provide a complete defense to every claim.
In Adloo v. H.T. Brown Real Estate, Inc., the Maryland Court of Appeals considered whether the listing broker was liable for a theft resulting from use of a lockbox. A clause in the exclusive listing agreement stated that the broker, his agents, or his subagents “are not responsible for vandalism, theft or damage of any nature whatsoever to the property.” In addition, the seller signed a lockbox authorization, which included the clause: “Seller further acknowledges that neither Listing or Selling Broker nor their agents are an insurer against the loss of personal property; Seller agrees to waive and releases Broker and his agents and/or cooperating agents and brokers from any responsibility therefore.” The theft occurred when a man identifying himself as a licensed agent looking to show the property was provided the combination to the lockbox. The policy of the listing broker was to verify the identity of cooperating agents before providing lockbox access. In this case, however, it violated its own policy and negligently failed to verify the man’s identity. The Court of Appeals ruled that the waiver of liability clause did not protect the listing broker from liability for its own negligence. It is the law of Maryland that a contract will not be interpreted to indemnify a party against his own negligence unless such intention clearly is expressed. Massachusetts courts are likely to follow the same reasoning. In addition to disclaimers in listing agreements, another way to reduce your risk is to provide the seller with a list of tips to reduce the risk of loss or liability.
Advice for Sellers
- Secure or Hide Valuables
It is recommended that sellers lock up valuables in a safe place away from the property until the property is sold. Some banks offer their customers safe deposit boxes free of charge. To reduce the risk of identity theft, it is recommended that sellers put away bank statements, financial documents, bills, and credit card receipts. For privacy reasons, they may also wish to remove personal photographs.
Lock Up or Hide Medications
It is recommended that the seller and all other occupants of the property lock up or hide medications in a safe place until the property is sold. Some sellers find it convenient to place medications in the locked trunk of a car.
Inspect and Warn of Dangers
Sellers should be asked to inspect the property and advise the broker in writing of any condition thought to present a danger. For example, if the seller knows that the railing of the deck is not secure, prospective buyers and their agents should be warned so that the individual is not injured. If the condition cannot be repaired, it may be appropriate for a warning sign to be posted.
Dogs and other pets may present a hazard to real estate agents and prospective buyers. They should be removed from the property during showings. Litter boxes and animal beds/blankets that may be the source of odors and allergies should also be removed.
Open houses have been an effective tool in marketing a property. On the other hand, exposing a property to the public via an open house increases the risk that the seller’s property and medications will be subject to potential theft. Discuss with the seller their preferences for holding open houses and request written authorization. If an open house is held, stress that it is the responsibility of the sellers to secure and insure valuables.
Verify Insurance Coverage
Sellers are advised to confirm the extent of insurance coverage for personal injuries and property damage before an injury or loss occurs. Precious jewelry may need to be scheduled separately on their insurance policy. They may also wish to adjust the amount of their deductible. Brokers should make sure that they have both “errors and omissions” insurance to guard against professional malpractice, as well as “general liability insurance” to provide coverage for bodily injury claims. Finally, when showing properties to a new buyer client, female agents should make sure that the office staff knows their itinerary and consider having a second agent accompany them on the showings.