In real estate sales transactions, things can sometimes go wrong. More frequently the Dutch courts have to get involved. In this blog, I provide a brief anthology of some 2024 rulings on broker liability. The person who buys a property may generally expect the property to be suitable for normal use. Whether that expectation is justified depends, among other things, on what has been communicated to him by the seller (and his broker) and what he himself could have seen or investigated. This is a complex legal test which is regulated in Article 7:17 of the Civil Code, about which there is a lot of jurisprudence and of which all circumstances of the case are important for the assessment.
Cause of real estate broker's liability is usually faulty information
A broker is the lynchpin of information between a seller and buyer when selling real estate. The information provided during the sale comes under scrutiny when a defect or other imperfection is discovered by the buyer: the house sold turns out to have no underfloor heating at all, the slightest rain floods the garden, the house turns out to be smaller than stated in the sales brochure, there is an inexplicable stench in the house, it was built without a permit, it could be anything. The real estate agent has a duty of care to his own client but must also consider the interests of the other party. Information provided about a home must be correct; and essential information must not be withheld. For example, a selling broker may be liable to a buyer if the buyer suffers damage due to an error made by the broker. But a buying broker may also be liable if he fails to carefully advise and guide his client. I selected a number of rulings from 2024 and a single one from 2023. In each case, I indicate the standard on which the court bases its assessment of whether there is culpable conduct on the part of the broker that leads to liability.
The standard for liability of selling broker towards prospective buyer
According to established case law, a selling broker acts unlawfully vis-à-vis a prospective buyer if the broker fails to exercise the due care that may be expected of the broker under the circumstances of the case. This can be the case if, prior to the sale, the property agent provides the prospective buyer with incorrect or misleading information about the properties of the property which he must understand could be important for the (involved) buyer in his purchasing decision. If the property in question is a house, these properties generally include the net living or usage area. In assessing whether the real estate agent, by providing such incorrect or misleading information, has acted unlawfully towards the buyer, it comes down to the trust that the buyer was entitled to derive from the given information in the circumstances of the case (see HR 13 July 2018, ECLI:NL:HR:2018:1176 with reference to HR 17 February 2012, ECLI:NL:HR:2012:BV6162).
Broker's liability to buyer – rejected
In this case, the buyer argued that the broker did not convey to the seller the offer made by the prospective buyer, nor did he inform the prospective buyer that there were other interested parties with whom negotiations were underway. The court indicated that the standard to be tested against is as follows: The question whether an estate agent acting for the seller has acted with sufficient care towards a (potential) buyer must be answered on the basis of the circumstances of the case (cf. HR 17 February 2012, ECLI:NL:HR:2012:BV6162) and HR 17 October 2014, ECLI:NL:HR:2014:2987). During the viewing, possible environmental law issues that were attached to the property were discussed. An appointment was made at the broker's office to discuss the necessary follow-up steps to grant the required environmental permit for the desired activities. By letter dated July 22, 2021, the buyer held the real estate agent liable for all damages suffered and to be suffered as a result of the failure to pass on his offer and consequently the loss of the sale.
In the judgment of November 23, 2022, the Limburg District Court rejected the buyer's claims and ordered him to pay the legal costs. The buyer then appealed to the Court of Appeal. But the trial court also rejected the claim. The court of appeal considered that the selling party itself chose to sell to and other, rejecting the option of a possibly higher sales price. In light of these circumstances, in the court's opinion, the real estate agent cannot be expected to have informed the prospective buyer of an offer from another prospective buyer.
Dwelling not remodeled according to issued building permit
It is established in this case that the home was not remodeled in accordance with the issued building permit. This was essential information for buyers. The real estate agent should have reasonably understood this as well. The deviations from the building permit are considerable, and the deviation with regard to the permitted contents of the house is particularly striking. The selling broker has not exercised sufficient care in this respect. The court considered that in terms of information provision, there was also a shortcoming on the part of the sellers, but that does not alter the fact that there may be unlawful acts by the selling broker. In the opinion of the court, the selling real estate agent could have been expected to investigate the deviations from the building permit. It was his duty as an NVM broker to inform the prospective buyers correctly and completely. The fact that buyers did not make use of the opportunity to inspect the drawings at the seller's does not alter this. The court estimated the damages due to higher housing costs at € 15,000, bringing the total damages to € 23,367.29. The real estate agent was ordered to pay damages.
Faulty tenant cited by real estate agent
A wrong tenant can cause considerable damage to a landlord; that happened in this case. The legal relationship between the parties qualifies as a contract of assignment as referred to in Article 7:400 of the Civil Code. At the heart of the dispute is the answer to the question of whether the real estate agent failed in her obligations under the assignment agreement. According to article 7:401 of the Civil Code, the real estate agent had to exercise the care of a good contractor in carrying out her assignment. This means that, in carrying out her assignment, she must exercise the care that may be expected of a reasonably competent and reasonably acting professional in similar circumstances, which depends on the circumstances of the case, including the nature and content of the assignment, the position of the contractor and the nature and seriousness of the interests involved (cf., inter alia, HR 15 June 2012, ECLI:NL:HR:2012:BW0727, r.o. 3.5.3.)
By judgment of May 26, 2021, the court ordered the broker to pay to the assignment an amount of €8,920.91 in damages, plus statutory interest, and an amount of €2,500.00 in surety, plus statutory interest, with compensation for litigation costs.
On appeal, the court of appeal considered that the real estate agent could be expected to request income and asset information from the potential tenant before entering into a lease agreement with him for the client. As the real estate agent failed to do so, this was a professional error and the real estate agent failed the client in this respect.
In the opinion of the court of appeal, it is part of the duty of care of an estate agent who mediates in the conclusion of a private rental agreement that, prior to the conclusion of the rental agreement in question, he thoroughly investigates the (potential) tenant by making an adequate check of the identity and financial details of this tenant. It is established that the broker failed to make this check with respect to the tenant before entering into a lease agreement with him. The broker thereby failed to act as befits a reasonably competent and reasonably acting broker. The ruling then discusses in detail what damages are eligible for compensation.
Same type of case: tenant starts hemp farm on rented house
Agreement of assignment for rental mediation by real estate agent. Breach of duty of care by letting agent due to insufficient investigation into activities and income of tenant. Rental agency is liable for lost rental income and damage to house and contents as a result of a hemp farm. The defense that it was (also) the tenant's own fault.
Attributable failure of seller and breach of duty of care selling broker
A selling broker can also be liable to a buyer. This has been established several times in case law. This was also the case in this court case
A selling broker acts unlawfully towards a prospective buyer if the broker does not exercise the due care that may be expected of the broker under the circumstances of the case. This can be the case if, prior to the sale, the broker provides the prospective buyer with incorrect or misleading information about characteristics of the property that he must understand could be important for the (involved) buyer in his purchasing decision.
The selling broker violated his duty of care to the buyer by failing to disclose the problems identified by a previous potential buyer regarding the roof and the drainage system, and is liable to compensate 50% of the damage suffered by the buyer as a result. Furthermore, the house does not comply with the contract concluded between the buyer and the seller because – contrary to what was communicated – not all of the facades have been fitted with cavity wall insulation and because there is more asbestos in the house than was communicated beforehand. The selling broker is therefore liable to the buyer for damages.
Incorrect data regarding the size of the property
Frequently, the area of the property sold is found to be incorrect. The buyers in this case purchased a home in De Blaak residential area in early 2019 where they were in contact with a real estate agent, who acted as the selling broker. Based on information they had obtained from the broker, buyers were under the impression that they were buying a home with a living area of 192 m2 and a capacity of 645 m3. Almost two years later, they discovered that this information was incorrect. They therefore believe that they paid too much for the property. They believe that the real estate agent made a mistake by not measuring the house with due care and providing them with incorrect data. Buyers have therefore held the real estate agent liable for the damages they have suffered, which in their view consists primarily of the difference between the purchase price arrived at on the basis of the incorrect data and the market value appraised taking into account the correct assumptions. The broker did not exercise due care, according to the judge. The judge estimates the damages. Buyers' assets are reduced by €80,000 because the home turns out to be smaller. And that amount of damages is awarded to the aggrieved buyer.
The court of appeal applied this standard when assessing the broker's conduct:
According to established case law, a selling broker acts unlawfully towards a prospective buyer if the broker fails to exercise the due care that may be expected of the broker under the circumstances of the case. This can be the case if, prior to the sale, the property agent provides the prospective buyer with incorrect or misleading information about the properties of the property which he must understand could be important for the (involved) buyer in his decision to purchase.If the property in question is a house, these properties generally include the net living or usage area. In assessing whether the real estate agent, by providing such incorrect or misleading information, has acted unlawfully towards the buyer, it comes down to the trust that the buyer, in the circumstances of the case, was entitled to derive from the information given (see HR 13 July 2018, ECLI:NL:HR:2018:1176 with reference to HR 17 February 2012, ECLI:NL:HR:2012:BV6162 and HR 17 October 2014, ECLI:NL:HR:2014:2987).
The sold property appears to be only partially zoned for residential use
The buyer in this matter finds that the zoning of the purchased residential property is inadequate. The seller can only be held liable for defects found after the purchase if there is a defect that precludes normal use as a "fully to be renovated shop/residential house" and plaintiff could not or should not have known that defect. What is important here is that the seller's duty of disclosure in respect of defects found takes precedence over the buyer's duty of investigation.
In principle, therefore, the destination of the premises pursuant to Article 6, paragraph 1 of the purchase agreement is at the buyer's risk. In this case, this is reinforced by the addition to the model in Article 20 of the purchase contract, in which the buyer – after having had an architectural survey and an appraisal carried out – declares, assisted by a buying agent, that she has been able to obtain sufficient information about the use/destination of the property purchased.
The court ruled that the passage "the destination, however, allows full occupancy" in the sentence in the NVM registration details and the sales brochure "Until now, the property has been used as a shop/residential building, however, the destination allows full occupancy, provided, of course, that it meets modern requirements" must, in view of the context, be reasonably interpreted as stating that the property can also be occupied without operating a store. Therefore, the fact that the outbuilding is not zoned "residential" is not sufficient to rule that the delivered property does not have the properties that buyer was entitled to expect.
Sold property turns out to be zoned agricultural business residence
The selling broker committed a tort against the buyer in this case because he failed in his duty of care towards the buyer. He should have researched the zoning of the house and informed the buyer about this. The buyer suffered damages due to the seller's breach of contract and the broker's tort. His damage consists of the costs he had to incur to realize a change in the zoning plan. These costs amount to € 44,070.93.
A selling broker acts unlawfully towards a prospective buyer if the broker does not exercise the due care that may be expected of the broker under the circumstances of the case. This may be the case, inter alia, if a real estate agent provides the prospective buyer with incorrect or misleading information prior to the purchase about the characteristics of a home that he must understand could be important to the buyer in the purchase decision (ECLI:NL:HR:2018:1176).
Buyer claims reimbursement of pollution remediation costs after purchase of property
By the buyer in this case has claimed reimbursement of remediation costs incurred by the selling broker. An 'innocent' soil survey was provided to the buyer with the sale information. Apparently in the hope that this would relieve him of his own duty to inform about the specifically imposed reporting obligation. The court believes that now that the report recommended a follow-up investigation, an attentive reader and potential buyer could have seen reason in it to explicitly request information about this from, for example, the real estate agent. By not doing so, the buyer himself also neglected his duty to investigate. Because for the court the obligation to provide information outweighs the obligation to investigate, 25% of the damage must be borne by the buyer.
The buyer has undisputedly stated that if he had had a correct representation of the facts, he would not have bought the house for € 285,000. To what price reduction the soil contamination and remediation obligation would have led, in the court's opinion, can only be estimated. The Court considers it plausible that the parties would have agreed on a purchase price of € 260,000, which in fact implies a price reduction of € 25,000. Since 25% of this will remain for the purchaser's account, because there is joint debt, the court will award the remaining amount of €18,750 as damages, plus interest thereon from the date of the purchase agreement.
Blenheim's Real Estate & Government team advises and litigates on the purchase and sale of real estate. We are happy to share our expertise with you.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
