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Real Estate: How to Avoid Breach of Fiduciary Duty

The best way to avoid fiduciary duty with regards to real estate transactions is to have a thorough understanding of what it means to be a fiduciary as this situation comes up often in business, not just in the real estate context. A fiduciary duty entails a legal duty to act completely in the best interests of another party. The person owing this duty is the ‘fiduciary’ while the ‘principal’ is the person who is on the receiving end of this commitment. The law says that a fiduciary must exercise the highest form of care, loyalty, trust, skill and responsibility when acting for a principal and must synchronize his or her interests to that standard. Among the most common lawsuits in the real estate transaction area is breach of fiduciary duty and such related infractions as  fraud and misrepresentation. The misconduct often has to do  about the condition of a property and misrepresentation about the value of a property. All material facts about a property must be disclosed in a real estate transaction. A common pitfall for fiduciaries is that they somehow think it is okay to act in their own interest and obtain some kind of benefit, financial or otherwise, even a minor one. Of course, real estate transactions in today’s work can be complicated and arduous. Consider all the paperwork that has be dealt with including property disclosure forms, home inspection reports, septic inspection reports, estimates for repairs, etc. There is plenty of room or both intentional and unintentional inaccuracies. All the more reason, however, to exercise care. Some other examples of breach of fiduciary duty in the real estate setting  might be failing to verify a property is the same one that was shown to the prospective buyer. This can happen when people rely solely on databases that might be outdated or inaccurate. Another breach might be failure to disclose that the land behind a property has been subject to mudslides or other natural conditions. Sellers think that ‘hiding the ball’ about these kinds of conditions is somehow okay. They are not. What is the best way to avoid a cause of action regarding breach of fiduciary duty? Here are some guidelines: Familiarize yourself with the local jurisdiction where the property is located so you know exactly what your duties and responsibilities are. If you have doubts or questions you can contact you local real estate authorities or else seek the guidance of counsel. Don’t Stray Outside Your Duties. While it may seem like you are currying favor with your client by doing something out of the ordinary, resist the temptation. Know Your Local Rules. Stay current with local rules and regulations of real estate. Put things in Writing. Don’t memorialize key real estate transactional elements by conversations. Put things in writing as memories can differ and fade. If there are changes along the way make sure each party initializes them. If you find yourself on the wrong end of a breach of fiduciary claim, contact your errors and omissions carrier and obtain legal guidance. R. D. Adair, PLLC offers experienced business counsel. To learn more about breach of fiduciary duty in the real estate context  or how we can help you on a related matter, contact us today to schedule a consultation.


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