Daily Development for
Monday, December 16, 1996

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

BROKERS; DUTY TO DISCLOSE: A real estate agent's statements to purchaser that the condominium unit he was purchasing was quiet and that there were no noise problems with the unit may be viewed as a statement of fact rather than merely a statement of opinion.

McEneaney v. Chestnut Hill Realty Corporation, 650 N.E.2d 93 (Mass. App. Ct. 1995).

At the time of purchase, the broker had indicated to plaintiff r that the condominium unit he was interested in purchasing was "quiet" and "had experienced no noise problems." Three years after buying the unit, the plaintiff began to experience noise and vibrations when the association upgraded and activited an air conditioner chiller that was inoperative at the time of his purchase.

The plaintiff sued the broker for misrepresentation. The trial court had granted summary judgment for the broker, but the appeals court reversed.

According to the appeals court, in some circumstances a statement that in form is one of opinion may constitute a statement of fact if it may reasonably be understood by the recipient that there are facts to justify the opinion, or at least that there are no facts that are incompatible with it. This is particularly true where the maker is understood to have special knowledge of facts unknown to the recipient. The broker in this case was deemed to have represented such special knowledge because the brokerage had an office at the condominium and was closely involved in the condominium sales. The court indicated that there were some allegations that the unit had experienced a noise problem in the past and that the broker knew it. Therefore, the statement that the unit was quiet was a statement of fact sufficient to support the claim of misrepresentation by the plaintiff.

In a strong dissent on this issue, Judge Kass pointed out that there were no allegations that this broker represented that she had any special knowledge of the history of the unit upon which the plaintiff could rely. Further, Judge Kass concurred in the trial court's view that even if the statement that the unit was quiet was not a simply matter of opinion, it was in fact true at the time it was made. Judge Kass commented:

"The claim against the broker is representative of a "round up all the usual suspects and let's see what we can shake out of them" approach to litigation. We should not allow ourselves to be seduced by it. Routinely, at bar associations and like public occasions, judges lament the high tide of litigation. Then we invite into the courts for further exploration cases that offend common sense. As Walt Kelly once had Pogo say, `We have met the enemy and they is us.' (Citations ommitted)."

Comment 1: A great deal of the disagreement between the majority and dissent has to do with how much latitude to give a plaintiff on a summary judgment motion. Is it possible that a jury could conclude, solely on the basis of the fact that a broker's employer has experience with the condominium building, that the statement that "the unit is quiet" reflects a report of the unit's history?

It is difficult to make out from the opinion if the court really is concluding that the broker implicitly represented expertise that she did not have, or if the sole basis for reversing the nonsuit is the failure to disclose the history of noise problems. The editor concurs that a history of noise problems in a unit is something that should be disclosed if the broker knows of it and has no reason to believe that the root source of the problems has been resolved. But this duty is based upon the general duty to disclose latent defects, and does not become any more binding when the broker voices such a general statement as "the unit is quiet."

Note that the dissenting judge points out that the plaintiff's own pleadings indicate that the likely source of the new noise problems resulted from changes in the chilling unit subsequent to the plaintiff's acquisition of it. This, of course, would absolve the broker of liability for misrepresentation because the plaintiff would not be able to show that the apartment had a noise problem when the representation was made.

Comment 2: A subtle but interesting legal question underlying this opinion is whether a brokerage firm that establishes itself as the "go to" office for a particular condominium or subdivision should be held to a higher standard for representations. Is it likely that buyers in fact rely upon such brokers as having expertise? Is it likely that the brokers actually encourage such belief? Should the broker be liable to fulfill the image it attempts to project?

Taking this issue one step farther, should a brokerage that advertises its long experience and many agents have any responsibility to manage the information that its many agents obtain from their long experience so as to make that information available to prospective purchasers? In the instant case, for instance, should the brokerage office have maintained files as to particular disadvantages of certain units so that any agent showing those properties would have access to the full "institutional wisdom" that the agency is advertising?

The editor concludes that brokerages who imply that they hold broad knowledge and special expertise have a duty to make the benefits of that knowledge and expertise available to each of the clients that the brokerage serves. This means reasonable information files and training of new agents in their use, subject, of course, to whatever duties of confidentiality that may be owed to clients from whom that information was obtained.

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