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Property Damage and Falls: When Things Go Wrong

Property Damage and Falls: When Things Go Wrong

Q: As a Realtor, can I be sued for damages occurring in or to a property that I’m showing?

As all real estate professionals know, it’s difficult to predict what bumps in the road may arise while a property is being marketed for sale. Even in the seemingly benign scenario of a vacant residential or commercial property, someone – be it a potential buyer, an agent, a vendor, a landscaper, or anyone else who may find themselves on the property – could be injured, or the property could be damaged or destroyed through fire, vandalism, theft, or a variety of other risks too numerous to list. Understandably, if an ongoing business is being operated on the property, the possibilities are almost endless.

A potential buyer, while viewing a property, could suffer a fall resulting in injuries. Appliances in a property could be turned on and forgotten, leading to a fire. Unlocked doors may  lead to theft or vandalism. If those resulting injuries or damages can conceivably be blamed on someone’s negligence or on the breach of some contractual duty, a claim will likely be made, and a lawsuit could follow.

Who is going to get sued? The short answer is that anyone involved in the transaction could be named in a lawsuit. For example, let’s say that during a property tour, a potential purchaser falls down a poorly lit staircase and breaks a leg. We can expect the injured party to sue (1) the property owner for allowing an unreasonably dangerous condition to exist on the property; (2) the seller’s broker, for failing to properly prepare the property to be shown; (3) the seller’s sales agent, for failing to warn of the condition; and (4) probably even the buyer’s own broker and agent, for failing to ensure that the property was safe to be shown.

Once sued, some of the named defendants could raise crossclaims against each other for contribution or indemnification. For example, the property owner could point a finger at the seller’s broker, who could, in turn, cast blame upon its agent. Similarly, the buyer’s broker and agent could blame one another as well. This next level of claims could be based upon theories of simple negligence, or alleged breaches of the various agreements between the property owner, the seller’s broker, and the broker’s agent, and between the potential buyer, the buyer’s broker, and that broker’s agent.

Irrespective of the facts of the case and who, if anyone, might actually be at fault, all potential defendants need to be sure that they’ve protected themselves against both an adverse judgment and what could very well be substantial costs associated with their legal defense.

While everyone involved should have insurance coverage, that might not always be the case. Sales agents should never assume that they will be covered by their broker’s policy, particularly as to the legal costs associated with their defense, since, as previously mentioned, the broker and the agent could find themselves on opposite sides of a crossclaim. Contracts between the brokers and their agents typically favor the broker, often provide that the broker (or its insurance carrier) will provide no legal defense for the agent, and sometimes even state that the agent becomes liable to indemnify the broker for any damages

As you can see, it is important for both brokers and their agents to review their contracts to determine liability in the event of a third-party claim against both. And it is always a good business practice to  ensure that all parties have proper coverage in place before moving forward in any real estate transaction.

Gary M. Schaaf

Gary M. Schaaf

GSCHAAF@beckerlawyers.com

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JoAnn Nesta Burnett

jburnett@beckerlawyers.com

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