John Hanson, a retiring school teacher and recent widower, was in the market for a smaller home. He consulted with Mary Lewis, an experienced real estate agent and wife of one of Mr. Hanson’s teaching colleagues.
In their initial meeting, Mr. Hanson told the agent that he wanted to downsize but still wanted to pursue his hobby of gardening. In particular, he wanted a property where he could build a greenhouse. After several weeks of touring homes and townhouses in the area, Mr. Hanson showed interest in a townhouse community that had extensive gardens surrounding the homes. He asked the agent to inquire whether he could build a small greenhouse attached to his back exterior wall of the townhouse should he decide to purchase the unit.
Mary Lewis spoke with the one of the association board members who told her that Mr. Hanson would have to present a request for an exception to the property rules; to date, no one had ever asked for such an exception. The association board member was not optimistic but said that Mr. Hanson could try his luck.
Later that afternoon, the agent called Mr. Hanson with the information she had received from the association board member. She recommended that Mr. Hanson keep looking as there was no guarantee that the association board would give their permission to build a greenhouse. She told him to think about it and let her know how he would like to proceed.1
The following day, Mr. Hanson called and said he wanted to make an offer on the townhouse. The agent was somewhat surprised as she knew that the building of a greenhouse was important to him and that the townhouse association might not allow it. Mr. Hanson said nothing about the greenhouse and the agent decided not to bring up the subject again.2
Several months after the closing on the townhouse, the real estate agent received a claim from Mr. Hanson, now a plaintiff. He alleged that the agent induced him to buy the townhouse by pledging that he would be given permission to construct a greenhouse and that the association board has refused to allow him to do so. He further asserted causes of action which included breach of contract; negligent misrepresentation; fraudulent misrepresentation; and violation of the consumer protection act. He sought damages in the amount of $100,000 for damages to rare plants as a result.
A motion for summary judgment was filed by the defendants and all causes of action were eventually dismissed except breach of contract. When the case finally went to trial, the defendant real estate agent prevailed but only after 3 years of lawyers, depositions and a trial at the cost of her nerves, her career and over $120,000 in legal related fees.
What we learned: Documentation helps to clarify what happened and what was said. It may also be your defense if you end up in dispute with your client.
Risk Factor #1
Had Mary Lewis documented her conversation with Mr. Hanson telling him that he may encounter opposition from the association board regarding the building of a greenhouse, she may have avoided expensive litigation.
Risk Factor #2
Mary should have followed that conversation up with a letter stating the same and recommending that he continue looking at different properties.