Choose Your Agent Wisely

Before signing the listing agreement and hiring a broker, a property owner should understand the principles of agency and be aware that he or she can unwittingly incur liabilities for the bad acts or omissions of the agent. When an owner hires a broker to represent him or her in the sale of the owner's property, a principal-agent relationship is created. The owner, as principal, is generally liable for any wrongful act of the agent when transacting the business of the agency.

California Civil Code Section 2338 provides as follows:

  • " . . . a principal is responsible to third persons for the negligence of his agent in the transaction of the business of the agency, including wrongful acts committed by such agent in and as a part of the transaction of such business, and for his willful omission to fulfill the obligations of the principal."
  • As an example, if in the course of selling the owner's property, the agent knowingly or negligently misrepresents to the buyer that the roof was recently replaced when no such work had been done, the owner could be sued directly by the buyer if the buyer later finds out about the deception and elects to resort to legal process to recover damages. The owner may even be liable for punitive damages for the acts of the agent even though there was no wrongdoing by the owner other than the misfortune of having hired an unscrupulous agent.
  • In addition, as principal, the owner will be charged with whatever the agent has knowledge of and ought, in good faith and the exercise of ordinary care and diligence communicate to the owner. It is no defense that the owner did not have actual knowledge (see California Civil Code Section 2332).

This article is for general informational purposes only. It does not constitute legal advice and is not intended as such. Do not act or refrain from acting on the basis of any information on this website. Always seek professional advice from the appropriate legal or other professional licensed in the relevant jurisdiction.