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by | Feb 24, 2026 | Uncategorized

BROKER RISK MANAGEMENT

WEEKLY PRACTICE TIP 

THE RISKS OF SPEAKING WITH CLIENTS’ ATTORNEYS

Recently, Broker Risk Management (“BRM”) has received a number of issues and claims arising out of agents communicating with their clients’ attorneys.  While the agents may feel an obligation to assist clients, even post-close of escrow, that assistance can lead to significant claims which can be costly, time consuming, and distracting to agents’ businesses.  Agents need to recognize that there are significant risks in communicating with clients’ attorneys.

SITUATION NO. 1:  After the close of escrow, the buyer discovers water intrusion and mold.  The buyer retains an attorney.  The buyer’s attorney contacts the buyer’s agent and asks the agent for a chronology.  The buyer’s agent provides it to the attorney, thinking that the agent was being helpful.  The chronology contains a number of facts which create liability for the agent.  A lawsuit follows against the agent and their broker, in addition to the seller.

DISCUSSION:  The buyer’s agent should not have spoken with the buyer’s attorney.  The proper response by the agent is “Our brokerage is represented by counsel.  Please provide your name and number and our counsel will contact you.”  The agent’s manager should have immediately been notified of the call.  The manager can contact BRM and BRM will return the call to the attorney.  Under no circumstances should an agent ever provide a chronology or documents to a client’s attorney.  Agents should also be reminded that their fiduciary duty obligations terminate upon the close of escrow.

SCENARIO NO. 2:  Agent lists a property where the husband and wife are getting a divorce.  Husband does not want to sell the property, and is uncooperative.  After the close of escrow and as part of the divorce proceeding, the wife’s attorney asks the agent to sign a declaration verifying the husband’s lack of cooperation.  The agent, sympathizing with the wife, signs the declaration which revealed confidential communications the agent had with the wife prior to the close of escrow.  After the property closes, the agent gets subpoenaed to testify at trial.  At trial, the agent gets aggressively cross-examined by the husband’s attorney.  Subsequently, the husband sues the agent for breach of fiduciary duty when it is discovered that confidential communications took place between the agent and the wife prior to the close of escrow and the agent took a position adverse to the husband.

DISCUSSION:  The legal liability in this situation began when the listing agent had confidential communications with the wife without involving the husband.  Agents representing sellers, including sellers in a divorce situation, owe equal fiduciary duties to all clients.  That means that an agent may not have a confidential communication with one spouse to the detriment of the other as that would constitute a breach of fiduciary duty.  The agent also did not recognize that once escrow closed the agent’s fiduciary duties and other obligations to the parties terminated.  Therefore, the agent had no obligation to assist either party after the close of escrow.  A further mistake the agent made was communicating with the wife’s attorney.  The agent also should never have signed a declaration without the involvement and review of a manager and/or BRM.  Further, the agent should have consulted with the agent’s manager when the agent was subpoenaed to testify at trial.  BRM can assist in the handling of such subpoenas.

Weekly Practice Tips

  1. You should never speak with lawyers representing your clients or anyone else.  You should then immediately advise your manager of the call.
  2. If an attorney contacts you, you should immediately respond, “Our office is represented by counsel.  Please provide your name and number and our counsel will return your call.”
  3. BRM is available to assist in returning these calls and responding to any inquiries by attorneys.  If necessary, when requested by your manager, BRM can provide requested information while limiting your risk.
  4. Do not:
    • Do not agree to meet with the client’s attorney – with or without your clients.
    • Do not sign anything, such as a declaration, if requested by an attorney.
    • Do not provide documents to any attorney except an attorney representing your brokerage, without your manager’s approval.
    • Do not agree to attend a mediation or hearing of any type, without management approval.
  6. In many instances, attorneys will 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.
  7. 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.
  8. There is no such thing as a “witness” at mediation. There is 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 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.  Just as importantly, you may jeopardize your insurance coverage as the insurance company can argue that you prejudiced its rights by attending without counsel or notice to the insurance company.

 

 

 

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 P.C. 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