An owner whose home was in foreclosure listed his property for sale with a real estate broker. An investor contacted the owner directly and agreed to save the property from foreclosure by taking title, paying the loan balance in full, then returning title upon the owner’s repayment of all costs he incurred plus a fee. The owner contacted his broker and discussed the arrangements. The broker confirmed the terms with the investor and prepared a purchase agreement at a price which covered the mortgage and all fees and charges on a sale of the property. The broker did not include documentation memorializing the terms of the investor’s return of title to the owner, but promised to do so at a later date. The document was never prepared and the escrow based on the purchase agreement closed. The investor resold the property within six months to a bona fide purchaser at a sales price one third more than his costs of acquisition. After three years but within four years from the date of the investor’s resale, the owner sought to recover his lost equity from the broker claiming the broker breached the duty of care owed to the owner as a client for failure to prepare the proper documents to preserve the owner’s right to recover title. The broker claimed the owner’s action was time-barred from recovery by a three-year statute of limitations for intentional misrepresentation since the owner filed action more than three years after he incurred losses due to the broker’s misrepresentation of his intentions to prepare the proper documents. A California court of appeals held a broker who promises and fails to prepare the proper documentation for a real estate transaction resulting in money losses for his client has breached his fiduciary duty and is not shielded by a three-year statute of limitations since it is the four-year statute of limitations for breach of fiduciary duty that applies for failure to act as agreed and in his client’s best interest. [Thomson v. Canyon (2011) 198 CA4th 594]
Editor’s note — For a detailed analysis of this case and other statutes of limitations affecting real estate agents and brokers, see the October 2011 first tuesday article, As time passes, stale claims crumble away and the December 2011 first tuesday article, Know your limitations, don’t be SOL.