BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
Agents receive many communications from clients after the close of escrow and wonder how to address those communications. Agents should be aware that the agents’ legal obligations to their clients terminate upon the close of escrow. Despite the law, agents routinely continue to communicate with their clients after the close of escrow, even if it is advisable not to do so. Please consider the following scenarios:
SCENARIO NO. 1
Agent represents the buyer. Escrow closes. The buyer contacts the agent and advises that there is a defect at the property. Buyer requests agent’s assistance in addressing the situation.
Recommendation: Agent should not make recommendations regarding resolving a defect or non-disclosure. Agent should advise the buyer that this has risen to the level of a legal issue, which is beyond the scope of an agent’s abilities and responsibilities. The agent should advise the buyer to seek the advice of a qualified California real estate attorney.
SCENARIO NO. 2
Buyer asks agent to write a demand letter to the seller requesting repairs or credits after the close of escrow.
Recommendation: Agent should not write demand letters on behalf of buyers. Writing demand letters is not only beyond the scope of the standard of care for a real estate agent, but it crosses the line into the illegal practice of law. (Practicing law without a license not only constitutes a crime, but errors and omissions insurance will not cover liability arising out of agents giving legal advice.) If the issue is $10,000 or under, agents may refer buyers to Small Claims Court. Agents may also refer buyers to the California Association of Realtors’ mediation services. Agents can also recommend that buyers speak with a qualified California real estate attorney.
SCENARIO NO. 3
Agent receives a call from the buyer or the buyer’s attorney advising that there is an issue at the property. The buyer requests copies of the transaction file.
Recommendation: Buyers are entitled to copies of the documents they received during the course of the transaction including contract-related documents, disclosures, and potentially, emails sent between the agent and the buyer. The buyer is not entitled to internal documents or emails between the agent and other parties or the other agent. The buyers should never be provided with documents post-close of escrow that the buyer did not receive during the course of the transaction unless a subpoena is secured.
SCENARIO NO. 4
Buyer contacts agent and requests a chronology of events and disclosures relating to the transaction.
Recommendation: Agent should immediately consult with their manager, but should never provide a chronology to anyone other than the agent’s manager and the agent’s attorney.
SCENARIO NO. 5
Buyer or seller contacts agent and advises that the party is proceeding to mediation. The party represents that the party does not intend to pursue any damages or claims against the agent. However, the party asks the agent to appear as a “witness” at a mediation.
Recommendation: There are no witnesses at mediation. Agents should never attend mediation without their own counsel. Immediately advise a manager, if such inquiry is made.
PRACTICE TIPS:
- Agents are reminded that their fiduciary duties to their clients end upon the close of escrow. Agents should be cautious with providing assistance to clients post-close of escrow.
- Agents should never attend mediation, arbitration, or other hearings as a “witness” on behalf of their clients without consulting with company counsel.
- If clients request documents post-close of escrow, agents should consult with their managers, but only provide the documents provided to the client prior to the close of escrow and should never provide emails with anyone other than the client or internal documents.
- Agents should never speak with their clients’ attorneys under any circumstances.
WEEKLY PRACTICE TIP: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is an attorney-client privileged communication 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 LLP. 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.