Does a seller’s agent owe a duty to the buyer to confirm an earthquake fault hazard report is compliant with current earthquake investigation standards?

Facts: A seller’s agent listed an undeveloped parcel of land on the multiple listing service (MLS). The listing stated the parcel was located in an earthquake study zone. The listing also referenced a Fault Hazard Investigation report generated 25 years before by a licensed geologist declaring the parcel was suitable for development. A buyer submitted an offer to purchase the property with the intent to develop the land for commercial use. While in escrow, the seller’s agent gave the Fault Hazard Investigation report to the buyer. After closing, the buyer discovered the report was not in compliance with current earthquake investigation standards and the county prohibited development of the land.

Claim: The buyer sought money losses from the seller’s agent, claiming the seller’s agent did not fulfill their general duty to the buyer to be honest and avoid deceitful conduct by making false claims in the listing since the seller’s agent did not confirm the findings of the outdated report concerning whether the parcel was suitable for development.

Counter claim: The seller’s agent claimed they did not breach their general duty to the buyer since they had no duty to further investigate the accuracy of the report as the listing correctly reflected what the report concluded, and displayed the date the report was published.

Holding: A California court of appeals held the seller’s agent did not breach their general duty of fair dealing with the buyer since the listing truthfully restated the information in the report and the seller’s agent had no duty to further investigate the ongoing reliability of a report or confirm the report complied with current earthquake investigation standards. [Saffie v. Schmeling (2014) _CA4th_]

Editor’s note – While the seller’s agent owes a general duty to be truthful and timely disclose known facts about the condition of the property, the onus to confirm a property is suitable for the buyer’s needs falls on the buyer’s agent. It is the buyer’s agent who owes the buyer a special fiduciary duty to care for and protect the buyer’s best interest. The buyer’s agent is therefore responsible for reviewing all natural hazard reports, investigating further and confirming the property meets the objectives of the buyer.

Though the buyer was unable to recover their losses from the seller’s agent, the buyer separately pursued their losses from their agent and broker and prevailed. [See first tuesday Form 314]