NYC Real Estate Agent Breach Claim Attorney

Fiduciary relationships promote fair play and protect interests in the real estate market. We trust professionals to walk us through real estate transactions. But what happens when you suspect a broker is breaching fiduciary duty?

At Richman Law Firm PLLC, we work on cases where brokers and real estate agents misrepresent property details, fail to disclose crucial information, or act negligently. Other common issues include conflicts of interest, failure to follow client instructions, and dual agency. Contact us today for a free consultation.

Real Estate Agent’s Fiduciary Duty

Fiduciary duty is the legal obligation that real estate agents and brokers have to act in the best interest of their clients. It consists of several responsibilities:

• Keeping high standards while managing the client’s affairs
• Acting in the client’s best interest
• Acting in good faith and dealing fairly
• Protecting the client’s confidential information

Breaches can happen when a fiduciary fails to fulfill responsibilities, such as self-dealing, conflicts of interest, or not acting with the caution and diligence expected of them.

Breaching fiduciary obligations may lead to liability for damages, legal fees, and loss of license. A complaint filed with the New York Department of State can result in a fine of up to $2,000 under Real Property Law § 441-c, or suspension or revocation of the agent’s license.

6 Fiduciary Duties of Real Estate Agents

The fiduciary relationship is built on trust and comes with many obligations to establish fair and ethical performance in all real estate transactions. Real estate professionals should comply with their fiduciary duties in all aspects of their practice:

Duty of Loyalty

Agents and brokers must prioritize their clients’ interests above their own, avoiding conflicts of interest and ensuring their actions align with their clients’ goals. This means putting the client’s needs first, even if it means sacrificing personal gain.

Duty of Care

Real estate professionals must act with reasonable care in representing their clients. This includes providing accurate information and avoiding negligence.

Duty of Confidentiality

Agents and brokers must not disclose sensitive information without full authorization, as doing so could compromise the client’s interests.

Duty of Disclosure

Agents and brokers must be fully transparent in all decisions, disclosing all material information to their clients, including any potential conflicts of interest or limitations on their representation.

Duty of Accounting

Agents and brokers must account for deposits, escrow money, and any other client funds. They must keep clear records and ensure all money is handled according to the agreed contract terms and applicable New York law.

Duty of Obedience

Agents and brokers must follow clients’ lawful instructions and adhere strictly to the contract terms. They must act within the scope of authority granted by the client and avoid unauthorized actions that could harm the client’s interests and lead to contract disputes.

Examples of Breach of Fiduciary Duties

The prudent person standard requires fiduciaries to act with the same care, skill, and diligence that an ordinarily prudent person would exercise in similar circumstances. This standard is often used to evaluate whether a fiduciary has breached their duty.

Below are some common examples of breaches of fiduciary duty that can result in legal liability. If you’ve experienced any of these, consult an NYC breach of fiduciary duty attorney.

Misrepresentation of Property

Misrepresentation involves providing false or misleading information about a property. This could include overstating the property’s value, understating its defects, or providing wrong information about its features. Misrepresentation can also be considered a form of professional negligence.

A fiduciary is required to provide accurate and complete information about a property. If they knowingly or negligently misrepresent the condition, value, or any other aspect of the property, this can lead to financial losses and legal complications for the client.

Failure to Disclose Relevant Information

The fiduciary role requires that agents disclose known defects, potential legal issues, or other pertinent facts affecting the client’s decision to buy or sell.

For instance, if a real estate agent is aware of a structural defect in a property but fails to inform the potential buyer, the buyer could face significant repair costs after the purchase. This lack of disclosure could be grounds for a lawsuit against the agent for breach of fiduciary duty.

Negligence

Negligence refers to the failure to exercise the care that a prudent person would exercise in similar circumstances. In real estate transactions, negligence can involve failing to use adequate due diligence, properly document transactions, or advise clients of potential risks.

If negligence results in financial loss or harm to the client, this could constitute a breach of fiduciary standards. For instance, if a real estate broker fails to review a contract before advising their client to sign it, and this oversight leads to negative consequences for the other party, the broker could be held liable for negligence.

Conflicts of Interest

A conflict of interest happens when a fiduciary’s obligations conflict with their duty to act in their client’s best interests. For example, a conflict of interest could happen if a real estate agent fails to disclose that the seller is a family member.

Cases in which agents self-deal can compromise the broker’s ability to provide unbiased advice and representation, potentially harming the client.

Failure to Follow Client Instructions

A fiduciary must follow the client’s instructions. This includes sticking to the client’s preferences and carrying out transactions following the client’s directions.

For instance, if a client instructs their real estate agent to list their property at a specific price, but the agent lists it at a higher price without the client’s consent, this could be considered a breach of fiduciary duty. The client may have grounds for legal action against the agent for any financial loss or other harm resulting from this breach.

Dual Agency

Dual agency happens when a real estate agent or broker represents the buyer and seller in the same transaction. In such a case, the agent has a fiduciary duty to both clients and has to balance these duties impartially.

However, this can be challenging as the interests of the buyer and seller often conflict (the seller wants to sell at the highest possible price while the buyer wishes to buy at the lowest possible price).

While dual agency is not legal in some states, it is legal in New York. Yet, it comes with risks. Additionally, it’s lawful only with informed written consent from both parties. In residential transactions, New York’s statutory agency disclosure form documents that consent.

The form must be presented to the buyer and the seller before the listing agreement is signed. If dual agency is not properly disclosed and managed, it can lead to conflicts of interest and breaches of fiduciary duty.

Proving a Breach of Fiduciary Duty

Proving a breach of fiduciary duty involves demonstrating that a fiduciary relationship existed, that the fiduciary failed to uphold their duties, and that this breach caused loss to the beneficiary.

An arm’s-length transaction does not create fiduciary obligations on its own, and the seller’s agent generally owes no fiduciary duty to the buyer. The duty runs to the professional’s own client, so the first question in any claim is whether the agent was indeed representing you.

To establish a breach of fiduciary duty, claimants must show that the agent or broker breached one of the six fiduciary duties expected of them.

Timelines for Filing Claims Against Real Estate Agents in NYC

In New York, a breach-of-fiduciary-duty claim seeking money damages must generally be filed within three years, while a claim seeking equitable relief carries a six-year deadline.

When the breach is grounded in fraud, the deadline extends to six years from the fraud or two years from the date you discovered it, whichever comes later. Waiting too long can end an otherwise strong claim. So, don’t wait to contact a real estate attorney to help determine whether you have a valid claim.

Compensation in a Breach of Fiduciary Duty Claim

Under New York’s faithless servant doctrine, a broker who breaches their fiduciary duty forfeits the commission on the transaction. This applies even when the client cannot prove damages. The doctrine goes back more than a century in New York courts and applies directly to real estate brokers.

Courts can also award punitive damages on top of compensatory damages when the breach is egregious or involves fraud. In cases involving undisclosed dual agency or fraud, a court may rescind the transaction entirely rather than merely award monetary damages.

Contact Our Real Estate Lawyers for a Free Consultation

A breach of fiduciary duty in real estate negotiations can lead to financial losses and other complications. We may help you file a claim to recover damages for your losses. Contact our real estate attorney today for a free consultation.

Frequently Asked Questions

What should I do after a broker discloses my information to third parties?

A fiduciary should not disclose confidential information about their client without permission. If your real estate agent has disclosed a financial situation or negotiation strategy to a potential buyer or seller, contact a breach of duty attorney as soon as possible.

What are some examples of fiduciary relationships?

Common fiduciary relationships include:

• Attorney-client
• Trustee-beneficiary
• Corporate director-shareholder
• Guardian-ward
• Partner-partner in a business partnership

How does the “business judgment rule” relate to fiduciary duty?

The business judgment rule is a legal principle that protects corporate directors from personal liability for business decisions made in good faith, with reasonable care, and in the best interests of the corporation. It’s a defense against breach-of-fiduciary-duty claims in the business context.

How do breach claims work for co-ops and cooperative apartments?

Buying into a cooperative apartment means purchasing shares in a corporation rather than residential real property directly, which changes how a misrepresentation claim works. Statements about a co-op’s finances, board approval, or building condition can still form the basis of a claim if they were false and you relied on them. The share structure affects both the paperwork and the remedies available, so these cases run differently from a standard house sale.

What is the difference between fraudulent and intentional misrepresentation by an agent?

Fraudulent misrepresentation and intentional misrepresentation generally mean the agent made a false statement knowing it was untrue, or with reckless disregard for the truth, intending you to act on it, as opposed to an honest mistake or a careless one.

Do these claims apply to commercial properties, or only homes?

Both. Misrepresentation and breach claims can involve commercial properties as well as residential ones, and the same principles of real property law apply to each. Business buyers, property owners, and developers face many of the same disclosure and reliance questions as individual homebuyers. The scale and sophistication of the parties can affect how a court weighs reasonable reliance.

What’s the difference between a breach of duty and fraudulent misrepresentation?

A breach of duty occurs when a real estate agent or broker fails to fulfill their fiduciary responsibilities, such as acting in good faith or disclosing material information, which may be negligent or intentional.  Fraudulent misrepresentation means the agent knew and gave you false information or concealed a material fact to induce you into a transaction, and you relied on that misrepresentation and suffered harm as a result.

What does the Property Condition Disclosure Act say?

The Property Condition Disclosure Act requires sellers of residential real property in New York to complete a disclosure statement covering the condition of the property and deliver it to the buyer before a binding contract of sale is signed. Sellers were once able to offer a credit at closing instead of completing the form, but New York has eliminated that option, and the disclosure is now mandatory. Brokers have their own duty under the law: the listing agent must inform the seller of these obligations, and the buyer’s agent must inform the buyer of their rights before the contract is signed.

What do I need to prove my broker violated their responsibilities?

To prove a broker violated their fiduciary duties, you must show that a fiduciary relationship existed, the broker failed to uphold their duties (such as loyalty, care, or disclosure), and that this breach caused you financial loss or harm. Evidence may include contracts, communications, disclosures, or proof of false or omitted information.

What happens if I can’t determine how much the breach cost me?

You don’t need to prove your losses down to the dollar. New York courts require reasonable certainty. When the broker’s own misconduct is what makes your damages difficult to calculate, courts may tolerate some uncertainty. Purely speculative losses won’t support a claim, though, so documentation matters. An experienced attorney can assist in calculating recoverable losses, including direct damages, consequential losses, or other compensation you may seek.