Sunday, June 17 , 2018, 8:07 pm | Mostly Cloudy 63º

Real Estate

Alec Bruice: California Supreme Court Hears Dual Agency in Real Estate Transactions Case

The California Supreme Court heard oral arguments this week in a case, Horiike v. Coldwell Banker, that is being closely followed by the real estate industry.

“At its core, the Horiike case is an issue of a buyer not reading all of the information that was presented to him, but Horiike is trying to turn a normal disclosure case into an agency case,” said California Association of Realtors President Pat “Ziggy” Zicarelli. “Some groups may believe that dual agency should be outlawed and want to use this case for that premise or as a stepping stone to that end.”

In the case, homebuyer Hiroshi Horiike purchased a mansion in Malibu, Calif., and worked with a Beverly Hills, Coldwell Banker real estate licensee. The property was listed by a Coldwell Banker licensee in another office.

Horiike complained he was misled about the property’s square footage. The issue is complex, however. 

The City of Malibu includes some outdoor living areas in determining square footage, which impacts whether the property may be expanded. Most square footage measurements do not include outdoor living areas in square footage.

These facts were fully disclosed, but apparently the buyer never read the information. Horiike sued the seller’s licensee, Chris Cortazzo, stating that Cortazzo and Coldwell Banker breached their fiduciary duty and failed to advise him to hire a third party to verify the actual square footage.

He did not sue the Beverly Hills licensee with whom he was working.

The law has always required disclosure of known material facts about a property for sale. The California Association of Realtors provides many tools and forms to assist in making the transaction transparent as it relates to known material facts.

As to duties not involving disclosure, most consumers would not expect a seller’s licensee to duplicate the same tasks and duties of a buyer’s licensee in the same transaction or to be held responsible if they were not done properly.     

In the 2012 jury trial, the jury fully exonerated the seller’s licensee, Cortazzo, and Coldwell Banker on the buyer’s claims for negligent misrepresentation, intentional misrepresentation and concealment.

In other words, after many days of trial and examination of the evidence, the jury felt the information was properly disclosed. Before the jury trial, since the judge ruled that the seller’s licensee, Cortazzo, did not owe a fiduciary duty to Horiike, there was no breach of a duty attributable to Coldwell Banker.

An appellate court overturned the trial court ruling. Coldwell Banker appealed to the California Supreme Court.

California law has allowed brokers to represent both parties with their informed consent since well before the 1980s. California even has a specific form to accomplish this.

Such consent has been required for many decades and continues to give choice to consumers. However, just because a brokerage represents both buyer and seller in a transaction that should not automatically mean that each individual licensee owes a fiduciary duty to both parties.

“There are many different real estate brokerage models, and the law allows consumers to choose between a big or small firm; and those firms that are exclusive to buyers, exclusive to sellers, or represent both,” Zicarelli said. “Narrowing the business model for a competitive advantage for one model would limit that choice. And the reality is, at the outset no buyer knows for sure what property they will buy, and no seller knows for sure who the eventual buyer will be. 

Therefore, a real estate licensee never knows if there’s going to be a dual agency at the time a listing is taken or when a buyer begins looking for a property.

If the eventual consequence resulting from this case is that brokerage dual agency is prohibited, buyers will be restricted in the properties they can explore, and sellers will have a limited pool of buyers.

Allowing all parties to explore buying or selling more properties on the market, not fewer, benefits the consumer.  

Leading the way in California real estate for more than 110 years, the California Association of Realtors is one of the largest state trade organizations in the United States with 185,000 members dedicated to the advancement of professionalism in real estate.

*Taken from the California Association of Realtors.

Alec Bruice is a licensed real estate broker with Santa Barbara Brokers and the 2016 president of the Santa Barbara Association of Realtors. Contact him at [email protected] or 805.637.5774. The opinions expressed are his own.

Support Noozhawk Today

You are an important ally in our mission to deliver clear, objective, high-quality professional news reporting for Santa Barbara, Goleta and the rest of Santa Barbara County. Join the Hawks Club today to help keep Noozhawk soaring.

We offer four membership levels: $5 a month, $10 a month, $25 a month or $1 a week. Payments can be made through PayPal below, or click here for information on recurring credit-card payments.

Thank you for your vital support.

Become a Noozhawk Supporter

First name
Last name
Enter your email
Select your membership level

Payment Information

You are purchasing:

Payment Method

Pay by Credit Card:

Mastercard, Visa, American Express, Discover

Pay with Apple Pay or Google Pay:

Noozhawk partners with Stripe to provide secure invoicing and payments processing.

  • Ask
  • Vote
  • Investigate
  • Answer

Noozhawk Asks: What’s Your Question?

Welcome to Noozhawk Asks, a new feature in which you ask the questions, you help decide what Noozhawk investigates, and you work with us to find the answers.

Here’s how it works: You share your questions with us in the nearby box. In some cases, we may work with you to find the answers. In others, we may ask you to vote on your top choices to help us narrow the scope. And we’ll be regularly asking you for your feedback on a specific issue or topic.

We also expect to work together with the reader who asked the winning questions to find the answer together. Noozhawk’s objective is to come at questions from a place of curiosity and openness, and we believe a transparent collaboration is the key to achieve it.

The results of our investigation will be published here in this Noozhawk Asks section. Once or twice a month, we plan to do a review of what was asked and answered.

Thanks for asking!

Click Here to Get Started >

Reader Comments

Noozhawk is no longer accepting reader comments on our articles. Click here for the announcement. Readers are instead invited to submit letters to the editor by emailing them to [email protected]. Please provide your full name and community, as well as contact information for verification purposes only.

Daily Noozhawk

Subscribe to Noozhawk's A.M. Report, our free e-Bulletin sent out every day at 4:15 a.m. with Noozhawk's top stories, hand-picked by the editors.

Sign Up Now >

Meet Your Realtor Sponsored by Village Properties

Photo of Gary Welterlen and Carla Reeves
Gary Welterlen and Carla Reeves
"We both love this business. We strive to make life long relationships from each real estate transaction."

Full Profile >