LEGAL DO’S AND DONT’S FOR REAL ESTATE PROFESSIONALS

As a licensed real estate professional you should know that as a condition to becoming and staying licensed in Maryland you must abide by the Maryland Real Estate Broker’s Act (MREBA) and the Code of Ethics found in the Code of Maryland Regulations (COMAR). Both create certain legal duties and obligations that may be addressed at either the Maryland Real Estate Commission or in a court of law. This is not the same as the Maryland Association of Realtors Code of Ethics which is not law, but just additional ethical duties created by local boards and association committees. The MREBA and COMAR Code of Ethics, may also give rise to civil liability based on violations of those provisions where private litigants are concerned.

So what are these legal do’s and dont's? For starters, under the MREBA, a licensed real estate professional must refrain from (a) directly or through another person willfully make a misrepresentation or knowingly make a false promise; (b) intentionally or negligently fail to disclose to any person with whom dealing, a material fact that they knew or should have known and that relates to the property being dealt with; (c) engage in conduct that demonstrates bad faith, incompetence, or untrustworthiness or that constitutes dishonest, fraudulent or improper dealings; and (d) with actual knowledge of the violation, associate with any other licensed real estate professional in a transaction or practice that violates any provision of the MREBA.
In addition, under the COMAR Code of Ethics, a licensed real estate professional shall (a) protect the public against fraud, misrepresentation or unethical practices; (b) make every reasonable effort to ascertain all material facts and in order to fulfill the obligation to avoid error, exaggeration, misrepresentation, or concealment of material facts; (c) not be a party to the naming of false consideration in any document; and (d) protect the interests of the client and provide absolute fidelity primarily to the clients’ interest.

These are just some of the legal do’s and dont's arising under the MREBA and COMAR Code of Ethics. Violations of statutes and the presumptions that arise from those violations are dictated by the specific language in the statute which may or may not provide for a private right of action. If they do provide for a private right of action or if they are silent on the matter, violating a particular statute may create what is called in legal terms as negligence per se and an automatic presumption that the real estate professional committed negligence. That presumption shifts the burden of proving otherwise to the real estate professional charged with the acts of negligence per se where it would normally be the plaintiff claiming negligence who bears the burden to prove the allegations being made. Violations of the MREBA and COMAR Code of Ethics do provide for inferences of negligence or other tortuous acts from which a jury or judge could conclude that the wrongful violations took place if there is evidence to support those conclusions.

A useful way to protect yourself against lawsuits based on violations of either the MREBA or the COMAR Code of Ethics is to use only approved forms provided for through the Maryland Association of Realtors. This includes such things as the contract of sale, disclaimers, disclosures and addendums in the contract documents, among other forms. You should also avoid where possible acting as a dual agent. While in most cases where a real estate professional acts as a dual agent, the seller and buyer sign off waiver forms, you are potentially exposing yourself to liability to both sellers and buyers, rather than just the seller or the buyer if you had represented only one party in the transaction. This is because a buyer’s agent owes much more stringent obligations and duties to the buyer as opposed to the seller and vice versa.

As real estate professionals you should ensure that any known defects or conditions of the property that are known, or through the exercise of due diligence could have become known, are disclosed to the buyer. While the seller has the right to disclaim certain conditions of the property, a buyer who purchased property that later turns into a money pit will not be very happy with their own agent for failing to use due diligence in researching the property and following best practices in representing the best interests of their client before a contract of sale is executed and before settlement is closed.

Keep in the back of your mind that every time you engage in a real estate transaction, you are potentially putting your license and livelihood on the line. If you treat it with that degree of seriousness, you should be motivated to go above and beyond in executing your professional obligations and serving the best interests of your client. Keeping copies of all pertinent documents are good practices to ensuring that you are a leg up in defending claims against you for fraud, negligence and breach of contract claims that may come months and even years after the transaction complained about took place. Remember, you are “professionals” and you will be held to that standard of care in a court of law and certainly by the Maryland Real Estate Commission.