1. Watch Your Step! The Guide to Representing Home Inspectors and Real Estate Agents Christopher B. Block, Esquire 425 Eagle Rock Avenue. Suite 302. Roseland, NJ 07068 P:973.618.4176 F:973.618.4100 E:cbblock@mdwcg.com Gawain Charlton-Perrin, Esq. Direct Phone: 630-760-3077 GCharltonPe@Hanover.com 1

2. DISCLAIMER The recommendation(s) and contents of this material are provided for informational purposes only. This material does not purport to address every possible legal obligation, hazard, code violation, loss potential or exception to good practice. It should not be construed as indicating the existence or availability of any insurance coverage. Hanover Insurance Companies and their affiliates and subsidiaries specifically disclaim any warranty or representation that compliance with any advice contained herein will make any premises, property or operation safe or in compliance with any law or regulation. The Hanover Insurance Group with Eagle Icon is a trademark of The Hanover Insurance Group, Inc. Copyright © 2013 The Hanover Insurance Group, Inc.

3. OUTLINE I. Real Estate Agent/Broker Common Issues and Claims II. Risk Management Tips

4. Real Estate Agent/Broker Claims I. Real Estate Agent/Broker Common Issues and Claims

5. Real Estate Agent/Broker Claims Breach of Fiduciary Duty Lack of Documentation or Vague Documents Property Condition and Disclosure Misrepresentations

6. Breach of Fiduciary Duty Duty of a Fiduciary – Duty of Loyalty obligates the fiduciary to put the interests of the client first ahead of the fiduciary’s self interest and not exploit the relationship for the fiduciary’s personal benefit

7. Breach of Fiduciary Duty Duty of a Fiduciary – Scope of Fiduciary Duty Skill, care & diligence in the transaction Accounting for all funds held Presenting all offers and counteroffers in a timely manner unless a party has previously directed the agent otherwise Disclosing all known facts that materially affect the value of real property and are not readily observable to the buyer – Seller completes form, but careful if you learn of information to the contrary to what your seller client is claiming, i.e., neighbor tells you.

8. Breach of Fiduciary Duty 3 out top 10 biggest damage awards involved Breach of Fiduciary Duty* – Real Estate Agent accused of derailing a deal by accepting a second offer while counter-offer pending – Real Estate Agent represents Seller, Seller advises of existing dispute with neighbor over surface water management. – Cash Back at Closing to “get deal done” *Source: National Association of Realtors – 2009-2010 Claim Statistics

9. Lack of Documentation or Vague Documents Marketable Record Title Act (MRTA) – Covenants & restrictions if not properly re-recorded can expire. Seller sells waterfront parcel to develop 8 homes. Appraisal assumes docks for each home. Buyer borrows money to close on parcel. After closing Buyer learns that the parcel does not include the right to buy docks.

10. Lack of Documentation or Vague Documents Landlord’s Real Estate agent tells prospective Dentist Tenant that Landlord would pay up to $75K to retrofit property for Dentist Practice. Lease language is ambiguous and could be interpreted to mean that Landlord will pay any amount, even in excess of $75K. Tenant sued Agent and Landlord. Buyer’s Real Estate Agent cannot prove that he emailed Inspection report to Buyer. Buyer sued Agent.

11. Property Condition and Disclosure Buyer claims Seller’s Real Estate Agent told him that A/C Unit was brand new, when it was in fact 5 years old and malfunctioned. Note Seller’s Disclosure indicated new A/C unit also. Buyer sued Agent and Seller

12. Property Condition and Disclosure Buyer claims Seller’s Real Estate Agent told him that roof had no material deficiencies; however, when it leaked, Buyer found out that the Roof Repair Company had been out to inspect same roof when Seller owned the house and told Seller that the roof had “major” deficiencies. Roofer even had pictures of roof from original site visit. Seller had told Roofer that he didn’t want to repair roof at that time. Note that Seller’s Disclosure indicated roof had no material deficiencies. Buyer sued Agent and Seller.

13. Misrepresentations Tenant claims Landlord’s Real Estate Agent said that Landlord would upgrade property at Landlord’s expense when Landlord did no upgrades. Tenant sued Agent and Landlord. Buyer claims Seller’s Real Estate Agent said that the road in front of the home was zoned to be snow plowed by municipality during winter when it was in fact not zoned in such a manner. Buyer sued Agent and Seller.

14. Misrepresentations Real Estate Agent tells Buyer that they could build a house on property when Agent knew that the property could not be built on. Buyer sued Agent and Seller. Seller tells his Real Estate Agent that there no material deficiencies on the property. A neighbor calls Agent prior to closing and tells Agent that there was a sinkhole on the property. Agent does nothing. Buyer sued Agent and Seller.

15. Risk Management Tips II. Risk Management Tips for Real Estate Agents and Brokers

16. Risk Management Tips Be aware of your role – who you represent Be careful what you say – Be truthful Document, document, document in writing – If not in writing, it didn’t happen – Can you prove you sent document? Be diligent and aware of all deadlines

17. Risk Management Tips Take Continuing Education Courses Recommend Home Inspections – In Writing Recommend Home Warranties – In Writing Never leave blanks on any written document Get all signatures Do not delay in communicating offers or responses to offers – Keep written proof of transmittal

18. Risk Management Tips Never notarize a signature signed outside of signer’s presence Don’t give legal advice or advising of rights – Encourage clients to retain an attorney – Never offer opinion on legal issues, zoning, property boundaries or anything not on MLS Stay away from dishonest or shady clients – Will get dragged into any litigation involving them

19. Risk Management Tips NO GOOD DEED GOES UNPUNISHED!

20. QUESTIONS? Gawain Charlton-Perrin The Hanover Insurance Group Professional Liability Claims and Risk Management (630) 760-3077 GCharltonPe@Hanover.com