Q: We represent a Buyer who bought an unimproved parcel to build their dream home. The Sellers had retained an architect to design a beautiful house but they ran out of money so their project never got started. The Listing Agent used the architect’s renderings to promote the property and the advertisements specified that the “plans were included in the sale”; the Purchase Agreement also specified that “the plans were included.” The Buyers agreed to the purchase because the Sellers’ plans worked beautifully with what the Buyers wanted to build.
After escrow closed, the Buyers received a “cease and desist” notice from the architect’s attorney stating that they could not use the architect’s plans for any purpose without hiring that architect for their project and paying him for the plans that he had already prepared. The Buyers are mad because they do not want to use that architect but they do want to use his plans as the Sellers had authorized. What can the Buyers do?
A: Although the Buyers should consult with a qualified California real estate attorney to address their potential transactional claims against the Seller and the Listing Agent, the reality is that in all likelihood the Sellers did not have the legal right to give away or sell the original plans (or any copies of those plans) to the Buyer.
Despite the fact that the Sellers paid to have the plans drawn up, most architects, designers and contractors who create such plans retain the ownership interest in those plans. The plans do not “run with the land.” The Seller cannot transfer the plans to anyone else for any reason unless the Sellers are specifically entitled to do so by the person who created those plans. The Seller’s ability to use the drawings and plans does not include the ability for anyone else to use those plans for any purpose; thus, Listing Agents cannot use those drawings in any advertisements without written authorization from the creator of those drawings.
The standard contract forms created by the American Institute of Architects for designing a new home, or expanding an existing one, contain the same three paragraphs which provide, in pertinent part:
- The drawings, specs and other material prepared by the Architect and/or the Architect’s consultants are deemed “Instruments of Service” which are exclusively owned by the Architect;
- The Property owner merely has a “nonexclusive license” to use that material, but only for the purpose and manner specified in the Agreement with the Architect; and
- The Property owner “shall not assign, delegate, sublicense, pledge or otherwise transfer” the plans, any reproduction of the plans, or any license granted regarding those plans “without the prior written agreement of the Architect.”
In other words, unless the Seller has obtained the written authorization of the creator of the plans to sell or even give those documents to the new owners, a real estate licensee should not advertise the existence of or the availability of any plans. If the plans are not owned by the Seller, then the Seller should not enter into any type of agreement regarding those plans without the knowledge and consent of the plan’s creator.
Attached as a separate PDF file to this Weekly Practice Tip is an article that has been reprinted with permission from the North Carolina Association of REALTORS® regarding possible copyright infringement claims that could arise from the use of an architect’s plans in the sale of a new home. A copy of the article can be given to your Sales Associates as long as you state in writing that it has been “reprinted with permission from the N.C. Association of REALTORS®. The bottom line of that article’s recommendations is worth repeating:
“Refrain from making or distributing copies of architectural drawings – in marketing materials or otherwise – without first obtaining written permission from the designer.”
PRACTICE TIPS:
- Listing Agents should warn Sellers that they cannot use existing architectural drawings to advertise the Property without first securing the written authorization of the architect to avoid any claims of copyright infringement or other potential claims.
- Listing Agents should avoid advertising the future potential of any property because the future potential may not happen. When the future is not as advertised, Brokers may face liability exposure for false advertising.
- Listing Agents should warn Sellers that they cannot sell or otherwise provide architectural plans or drawings to actual or potential Buyers without first securing the written authorization of the creator of those plans.
- When representing Buyers who want to use the Seller’s plans (for any purpose), Selling Agents should recommend that the Buyers should contact the creator of the plans directly to determine what the Buyers will be allowed to do with the plans and under what circumstances. The best time to make that recommendation is before the Buyer enters into any agreement with the Seller regarding the use or sale of the plans.
This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
© Copyright 2018 Broker Risk Management January 5, 2018