Thursday, December 19, 2013

You're Judge Judy. Who's Right: Buyer, Seller, HOA, Property Manager or Agents?

I left Remax pretty well convinced that eighty percent of what top management did was work at risk management. I'm pretty sure all of the big box brokers do, too. Look at a so-called Real Estate Sales Agreement, and by and large, you see a legal document describing who gets the earnest money when a dispute makes the transaction fail. In aiding their clients, real estate agents come dangerously close to practicing law, and management works hard to keep agents on their toes and themselves out of legal trouble.

Consider this case.

Mrs. Smith sold her home to Mr. Jones. Both were represented by real estate agents. In the course of the inspection, a hole in the sewer line was discovered. Mrs. Smith contacted her Homeowners Association (HOA) property manager to find out what she needed to do to repair the sewer line. The manager's assistant erroneously informed Mrs. Smith that since the sewer ran through the common area, it was the HOA's responsibility to repair it. Relying on the assistant's email, Smith and Jones completed the sale with no consideration being made for the sewer line hole.

Mrs. Smith subsequently asked her HOA to repair the sewer line hole. The HOA, pointing to the governing documents (Articles of Incorporation and C C&Rs), informed Mrs. Smith that sewer repair was clearly the individual homeowner's responsibility.

The sewer line was still not repaired when Mr. Jones took occupancy. He obtained a contractor's quote for $2,000 to repair the sewer line and had his attorney request payment from Mrs. Smith before completing the work.

Mrs. Smith, in turn, had her attorney request payment from the property management company, claiming that she had relied on its employee's advice that repair was the HOA's responsibility. The HOA's claim that this repair was clearly the homeowner's responsibility was not valid, since she'd relied on a management company employee's statement.

Who should pay?

1. The buyer, Mr. Jones, since he accepted the home in the condition it was in and made no arrangement to withhold funds or reduce the price
2. The seller, Mrs. Smith, since she assured Mr. Smith the HOA would make the repair.
3. One or both of the real estate agents, since their expertise should have better informed and structured the sales agreement.
4. The property management company, since its employee made a misstatement that Mrs. Smith relied upon.
5. The HOA, since it should have known what the property management employee had said.
6. No one, since buyer and seller should have exercised more responsible due diligence.

You be the judge.

Someone's gotta lose