Real Estate Lawsuits

Phoenix, Arizona Real Estate Litigation

The Bainbridge Law Firm, L.L.C., represents both buyers and sellers of residential and commercial real estate in real estate disputes, including actions against licensed real estate professionals. In Arizona, the real estate profession is regulated primarily by the Arizona Revised Statues and the Arizona Administrative Code. The Arizona Revised Statues provide the licensing requirements for brokers and salespersons and regulate various aspects of real estate. However, more often than not, the success of an action against a realtor depends on the interpretation of the Arizona Administrative Code.

Our real estate attorneys represent homeowners, investors, buyers and sellers, and other individuals and companies in real estate litigation relating to a wide range of property disputes. If you need help with a matter involving a breach of a real estate contract, title dispute, easement, fraud or nondisclosure, construction defect or other real estate related issue, contact our Phoenix law firm.

The Purchase Contract

The typical residential real estate dispute revolves around the terms of a standard purchase contract and the adequacy of disclosure. The purchase contract is typically a standard form adopted by The Arizona Association of Realtors. The contract is filled out by either the buyer’s or seller’s realtor or some combination thereof. The purchase contract sets forth various terms of the agreement, including the price and financing, as well as title and escrow details. Although disputes do arise regarding the terms of the purchase contract, more often than not, disputes arise as a result of inadequate disclosure. A purchase contract generally designates that the seller will provide a Seller’s Property Disclosure Statement within five days of the acceptance of an offer.

Seller’s Property Disclosure Statement (“SPDS”)

Sellers are obligated to disclose all known material facts about the property to the buyer. Again, the form typically used is a form developed by The Arizona Association of Realtors. The form is divided into six sections including: 1) Ownership and Property, 2) Building and Safety Information, 3) Utilities, 4) Environmental Information, 5) Sewer Wastewater Treatment and 6) Other Conditions and Factors – Additional Explanations. The SPDS asks questions regarding roof leaks, plumbing problems, swimming pool problems, presence of termites, drainage problems and the like. Inaccurate or untruthful statements on a SPDS can create legal liability for the seller of the property. If the seller’s real estate agent participated in the failure to disclose or was aware of certain deficiencies in the property without disclosing the deficiencies the realtor is potentially liable as well.

Arizona Administrative Code

Perhaps the most important section of the Arizona Administrative Code regulating the conduct of realtors is R4-28-1101, Duties to Clients. This section sets forth the professional conduct required by a real estate agent. There are eleven subsections to this particular code. Only two of the most relevant sections are discussed in this article.

R4-28-1101(A) is perhaps the most important and provides:

A licensee owes a fiduciary duty to the client and shall protect and promote the client’s interests. The licensee shall also deal fairly with all other parties to a transaction.

Obviously, this code section is open to interpretation. However, it is clear that a realtor cannot lie or misconstrue the facts, even to a party that the realtor does not represent. The cause of action for such a claim is generally called negligent misrepresentation or intentional misrepresentation. The difference between these causes of action hinges on the speaker’s knowledge of the falsity of the statement. Negligent misrepresentation is by far more common in the real estate arena. Liability for nondisclosure exists when an agent represents the nonexistence of a material fact or when a realtor fails to disclose a fact that he or she knows may justifiably induce the other to act or refrain from acting.

R4-28-1101(B) provides some additional guidance for a misrepresentation claim and states:

A licensee participating in a real estate transaction shall disclose in writing to all other parties any information the licensee possessed that materially or adversely affect the consideration to be paid by any party to the transaction including:

•1. Any information that the seller or lessor is, or may be, unable to perform;

•2. Any information that the buyer or lessee is, or may be, unable to perform;

•3. Any material defect existing in the property being transferred; and

•4. The existence of a lien or encumbrance on the property being transferred.

In the typical residential real estate lawsuit the buyer brings an action against the seller alleging that the seller or their agent had knowledge of material facts to the transaction that should have been and were not disclosed. The buyer then seeks the difference between the purchase price of the property and the fair market value of the property had the defect been known. Often times this requires the assistance of a professional appraiser. In certain situations the aggrieved party may be able to obtain a rescission of the purchase contract.

This article is not intended to be specific legal advice. It only provides general legal information. You should consult an Arizona licensed attorney if you have a legal issue. The Bainbridge Law Firm, L.L.C., is experienced in this area of law and are available for consultation. You may contact our Phoenix office at 602-902-1930.