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The Hazards of Speaking with Clients’ Attorneys

by | May 6, 2022 | Arbitration, Mediation and Liquidated Damages

BROKER RISK MANAGEMENT

WEEKLY PRACTICE TIP

 

It is natural for successful real estate agents to desire to help their clients.  In many instances, that assistance goes well beyond a real estate agent’s standard of care and what is required of real estate agents under the law.  Unfortunately, occasionally this assistance includes providing information and documents to clients’ attorneys.  This is an area of extreme high risk and should always be avoided.

 

SITUATION

Recently, one of our clients represented a buyer in the buyer’s purchase of residential real property.  The buyer undertook inspections, removed their investigation contingency, and then got cold feet and canceled the contract.  The deposit was in excess of $50,000.  The buyer and seller then had a dispute over who was entitled to the buyer’s deposit.  Both the buyer and the seller retained counsel who scheduled a mediation between the parties.  The agent was invited by the buyer’s attorney to mediation as a “witness.”  On behalf of the agent, we declined to participate in the mediation, but agreed to be available by telephone, in case the mediator had any questions.  The agent, without the knowledge of the broker or Broker Risk Management LLP (BRM), spoke with the buyer’s attorney, provided his complete file including emails and texts, and provided a timeline of the transaction.

During the course of the mediation, the mediator and the buyer’s attorney studied the agent’s documents and timeline.  Between them, they became convinced that the agent may have liability for failing to advise the buyer of certain information contained on the agent’s timeline.  The agent received a call from the buyer’s attorney and the mediator who requested that the agent contribute to the settlement of the mediation.  It was not until that point that the agent contacted his manager and we stepped in and stopped the request.  The dispute did not resolve at mediation.  It is currently unclear whether a lawsuit will be filed and if the agent will be named.  If the agent is named as a defendant, it is in large part because the agent voluntarily provided the buyer’s attorney with information and documents that the agent should not have provided.

 

PRACTICE TIPS

  1. When attorneys call, other than BRM or your own attorney, nothing positive can come from that conversation.  In other words, speaking with attorneys, even your own clients’ attorneys, will never be to your benefit.  Therefore, agents should never take calls from attorneys other than BRM or their own company attorneys.

 

  1. If you receive a call from a client’s attorney or any attorney representing a party to a dispute, you should immediately notify your broker or manager and ask for assistance in handling those calls.  The broker or manager can immediately call BRM for advice in handling the situation.

 

  1. Without the knowledge and approval of your broker or manager:

 

  1. Do not agree to meet with the client’s attorney – with or without your clients.
  2. Do not sign anything if requested by an attorney.
  3. Do not agree to attend a mediation or hearing of any type.

 

  1. Do not agree that you and/or your brokerage will be a party to the mediation. Buyers and sellers are obligated to mediate as the first step in resolving disputes between them.  However, agents and brokers are not bound by the mediation or arbitration clauses in the Purchase Agreement.  Only an attorney for your brokerage should make the decision for the brokerage to voluntarily agree to participate in a mediation.

 

  1. You should never provide documents to your client’s attorneys.  If documents are requested, the request should be referred to your broker or manager.

 

  1. In many instances, attorneys will be sneaky and have their clients (buyer or seller) ask you for documents.  While clients are entitled to receive copies of the documents to which they were entitled during the transaction, you should nonetheless also refer those calls to your broker or manager for handling.

 

  1. If a client or the client’s attorney tells you that they do not hold you responsible and you do not need to worry about being sued, do not believe them.  While that may be true at the time, once you provide information, they may create a reason to assert a claim against you.

 

  1. There is no such thing as a “witness” at mediation.  There are only the mediator and the parties; anyone else attending the mediation will be subject to a request for compensation to resolve the case.  The mediator’s job is to settle cases and raise money to pay off the claimant, and does not care where the money comes from.  Therefore, if you participate in a mediation without counsel, you will be a target and the mediator will request that you contribute funds.

 

 

 

 

 

 

 

 

 

 

 

 

 

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