Real Estate Agent Duty of Disclosure In California

The duty of care of a seller's broker, including the duty to disclose facts about the property, has been codified in sections 2079 through 2079.6. Section 2079, subdivision (a) provides, in relevant part: "It is the duty of a real estate broker . . . to a prospective purchaser of residential real property . . . to conduct a reasonably competent and diligent visual inspection of the property offered for sale and to disclose to that prospective purchaser all facts materially affecting the value or desirability of the property that an investigation would reveal, if that broker has a written contract with the seller to find or obtain a buyer . . . ." In section 2079.12, the Legislature expressly provided that the statutory duty of care, including the duty of disclosure contained in section 2079, "is declarative of the common law regarding this duty." The Legislative Counsel's Digest to Assembly Bill No. 2935 (1995-1996 Reg. Sess.), which enacted section 2079.12, states that by making the statutory duty of care, including the duty of disclosure, declarative of the common law, the Legislature intended the statutory duty to "preempt the common law regarding this duty." (Stats. 1996, ch. 476, 1.) In California, a broker who has signed a contract to act as a sales agent for the seller can also represent the buyer and act in the capacity of a dual agent in order to complete the sale and purchase of the property. Arguably, when acting as a dual agent, a broker could still be limited to the duty of disclosure to the buyer set forth in section 2079 even though the broker is also representing the buyer, since the broker "has a written contract with the seller to find or obtain a buyer" as provided by section 2079, subdivision (a). The capacity of a dual agent, however, appears to carry its own defined affirmative obligations toward both the seller and the buyer. These obligations are set out in section 2079.16, which provides that disclosure must be made to a client that a broker acting as a dual agent has a fiduciary duty of utmost care, integrity, honesty and loyalty in the dealings with either the seller or the buyer, and a duty of honest and fair dealing and good faith toward the buyer and the seller, and also must diligently exercise reasonable care and skill in performing the duties of an agent. In addition, section 2079.16 provides that a dual agent has a duty "to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the parties." Section 2079.16 also states that the aforementioned duties of a dual agent "do not relieve a Seller or Buyer from the responsibility to protect his or her own interests." Breach of a real estate agent's fiduciary duty to his or her client may constitute negligence or fraud, depending on the circumstances of the case. (Salahutdin v. Valley of California, Inc. (1994) 24 Cal. App. 4th 555, 563 29 Cal. Rptr. 2d 463.) Additionally, a real estate agent, as a fiduciary, is also '. . . liable to his principal for constructive fraud even though his conduct is not actually fraudulent. Constructive fraud is a unique species of fraud applicable only to a fiduciary or confidential relationship.' 'As a general principle constructive fraud comprises any act, omission or concealment involving a breach of legal or equitable duty, trust or confidence which results in damage to another even though the conduct is not otherwise fraudulent. Most acts by an agent in breach of his fiduciary duties constitute constructive fraud. the failure of the fiduciary to disclose a material fact to his principal which might affect the fiduciary's motives or the principal's decision, which is known (or should be known) to the fiduciary, may constitute constructive fraud. Also, a careless misstatement may constitute constructive fraud even though there is no fraudulent intent.'(Id. at p. 562, italics omitted.)