Real Estate Brokers BEWARE: SJC Rules that Purchaser of Real Estate Can Bring Misrepresentation Claim Against Real Estate Broker for Broker’s Incorrect Statements Regarding Property’s Zoning (May 2013)
In DeWolfe v. Hingham Centre, Ltd., the Plaintiff, a purchaser of real estate, brought claims against a real estate broker concerning misrepresentations that the broker allegedly made about the zoning designation of certain real estate (the “Property”) which the Plaintiff purchased. In advertising the Property for sale, the Broker described the Property as being zoned in the “Business B” district.
The Plaintiff was a hairdresser and was searching for a property which he could purchase and utilize as a hair salon. As the Plaintiff intended to make a commercial use of the Property, he alleged that he relied upon the broker’s representation that the Property was zoned in the “Business B” District and that he would not have purchased the Property absent said representation. After purchasing the Property, the Plaintiff learned that the Property was actually zoned in the “Residential B” District, which did not permit for his intended use of the Property as a hair salon.
The Plaintiff then brought an action in Superior Court against the broker and the seller of the Property for, among other things, misrepresentations concerning the zoning of the Property as “Business B,” rather than accurately advertising it as being in the “Residential B” District. The Superior Court granted the broker’s and seller’s motion for summary judgment and the Plaintiff appealed.
On appeal, the broker argued that it had no duty to confirm the zoning status of a property that it lists for sale. The Supreme Judicial Court vacated the Superior Court’s order and remanded the matter. The Supreme Judicial Court reasoned that a broker can ordinarily rely upon information provided by the seller when it makes representations regarding a property, but that the broker must exercise reasonable care in doing so. Conversely, the Supreme Judicial Court explained that a broker has an independent duty to investigate a matter concerning a property when the circumstances render it unreasonable to rely solely on the seller’s statements.
The Supreme Judicial Court ruled that summary judgment was not appropriate because there was sufficient evidence in the record to allow a trier of fact to determine that the broker failed to exercise reasonable care when it made representations about the Property’s zoning. The broker also argued that it could not be liable for his representations regarding the zoning because the Purchase and Sale Agreement contained a clause that the Plaintiff had not relied on any representations or warranties in entering into the transaction. The Supreme Judicial Court disagreed and ruled that the clause did not apply to previous written representations which were not set forth or incorporated within the Purchase and Sale Agreement itself.