In a setback for real estate brokers – and for the form agreement that they and many real estate lawyers use – the Appeals Court ruled last month that a broker could be held liable for a written misrepresentation regarding zoning. The case is DeWolfe v. Hingham Centre, Ltd. (pdf).
Before addressing the substance of the decision, it’s interesting that two of the three justices who sat on the panel that heard oral argument joined in the dissent. After the draft decision was circulated to the entire Appeals Court, Justices McHugh and Kafker were added to the panel, and they joined Justice Rubin (the other justice who heard the case) in the majority. Perhaps for this reason, the broker has moved for reconsideration and also is seeking review by the Supreme Judicial Court.
The plaintiff, Daniel DeWolfe, wanted to buy a property to which he could move his existing hair salon business. After seeing a newspaper ad for a site that he thought might be suitable, DeWolfe contacted the defendant listing broker. Both the newspaper ad and a listing sheet the broker had created said the property was zoned “Business B.” The broker also gave DeWolfe copies of pages from the town’s zoning by-law listing “Permitted Business Uses” in that district. After the purchase, it turned out that the property was in a “Residential B” district, where the contemplated hair salon was not allowed.
The broker relied on the following clause in the standard form purchase and sale agreement prepared by the Greater Boston Real Estate Board (GBREB):
The BUYER acknowledges that the BUYER has not been influenced to enter into this transaction nor has he relied upon any warranties or representations not set forth or incorporated in this agreement or previously made in writing, except for the following additional warranties and representations, if any, made by either the SELLER or the Broker(s):
The majority was concerned that the broker had repeatedly misrepresented the property’s zoning status. It distinguished the case from others holding that a broker can’t be held liable when she remains silent on zoning. The majority reasoned that the quoted language from the GBREB form unambiguously means that “[t]he only warranties or representations upon which the buyer may rely are those ‘set forth or incorporated in this agreement or previously made in writing.'” Because the broker’s representations about zoning had been made writing, the majority reversed the trial court’s grant of summary judgment to the broker.
The dissent took an entirely different view of the language that the majority saw as unambiguous, stating:
The warranties or representations that the buyer states he has not relied upon are broken down into two categories: (1) those “not set forth or incorporated in this agreement or” (2) those “previously made in writing.” After that, the parties may write in any exceptions, and here they added “NONE.” The clause thus sets forth two types of things which, the buyer agrees, have not influenced him and upon which he did not rely when he entered the transaction.
This decision reinforces that, in Massachusetts, the best policy for a broker (or a seller for that matter) is to remain mum. The decision also shows that widely-used form contracts sometimes aren’t as clear as one might expect.
We’ll let you if know if there is further activity in this case.