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Real Estate – Lot Reservation Agreement – Negligence

Where plaintiffs are suing defendant realtors to recover damages for the realtors’ alleged negligence in connection with the attempted purchase of real property through a lot reservation agreement, their claims for negligence in defendants’ alleged failure to keep them informed of a subdivision approval process and the purchase of the property by one of the defendants state a claim under standards for real estate agents and brokers.

In ruling upon defendants’ earlier demurrer, the court noted that the legislative changes enacted in 1995 served to limit plaintiffs’ right to recover against their agent and licensee predicated upon a theory of breach of fiduciary duty. Virginia Code Sect. 54.1-2144 provides that the common law of agency relative to brokerage relationships in real estate transactions to the extent inconsistent with this article shall be expressly abrogated. Plaintiffs have now restated their earlier breach of fiduciary duty claim as one predicated upon negligence.

While defendant and its agent must conform their conduct to certain statutory duties, the statute does not serve as a basis for an independent civil action by a buyer. Nothing in the statute’s regulation of a licensee’s conduct manifests a legislative intent to create such an action. Instead, breaches of statutory duties (per se claims), along with common law duties, would support recovery in damages for negligence.

Any duties owed by defendants to plaintiffs have their being in the agreement of agency but are imposed by both the express terms of the contract and by law. To the extent imposed by law, plaintiffs may recover in tort for damages that proximately result from a failure by defendant to conform its conduct to the standard of care imposed upon agents by statute and common law. Licensees in the performance of the terms of the brokerage relationship are bound to the standard of ordinary care. For example, a realtor is guilty of negligence if they offer for sale property they are not contractually authorized to sell or present to a client a contract that clearly fails to sufficiently reflect the accurate legal description of the property to be conveyed.

Here, it is alleged that defendant acting through its agents and employees, violated the standard of care owed plaintiffs by failing to fulfill its duties or obligations or exercise good faith when it did not disclose to them the status of the subdivision approval process for the property, including the sale of the property to one of the defendants; by failing to exercise good faith to plaintiffs when it did not remain informed of the subdivision approval process important to the contract; by failing to disclose material facts in a timely manner to plaintiffs when it did not inform them of the purchase of the property by one of the defendants; and by failing to disclose material facts and exercise ordinary care. Among the duties imposed upon a licensee engaged by a buyer are the disclosure of material facts relating to the property or concerning the transaction of which the license has actual knowledge and the exercise of ordinary care.

The court concludes that the instant pleadings sufficiently state a cause of action for negligence of defendant and the demurrer should be overruled. To the extent count V seeks to recover damages based upon a statutory claim for a violation of the Virginia Code, the demurrer will be sustained.

Della Monica v. Hottel, Trustee (Horne, J.) Chy. No. 23131, May 24, 2004; Jeffrey G. Gilmore, H. Kent Kidwell for the parties VLW 004-8-132, 4 pp.

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