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Clark v. Allen: No Liability for Dual Agent’s Alleged Misrepresentation

An Ohio court has considered whether a homeowner could be liable for inaccurate statements made by dual agent listing broker about the owner’s attempt to remedy dampness in a crawl space.

Matthew and Betty Allen (“Sellers”) sold their home to Christopher C. and Shirley Clark (“Buyers”) in 1996. Roger Yost (“Salesperson”) was the real estate professional who acted as a disclosed dual agent for both parties in the transaction. The Sellers gave to the Buyers a property condition disclosure form on which the Sellers checked the “yes” box next to a question asking whether they knew of any “current water leakage, water accumulation, excess dampness or other defects with the basement/crawl space”. The Sellers did not provide any further information on the form about their response to this question.

In 1994, the Sellers had their home inspected for termites. While the termite inspector did not discover any termites, he did discover dampness in the crawl space as well as fungi growing on the floor joists in the crawl space. Upon being told about the termite inspector’s discovery, the Sellers contracted with the termite inspector for installation of vents in the crawl space as well the spraying of the floor joists. The Sellers stated that they believed that these actions had solved the “dampness” problem in the crawl space, as they had no further problems with dampness in the crawl space. However, the Sellers checked “yes” on the property condition disclosure form in order to alert potential buyers that such a problem had existed in the past.

The Sellers’ response on the property condition disclosure form caused the Buyers to ask the Salesperson about the crawl space. Allegedly, the Salesperson told them that the Sellers had treated the crawl space with a silicone, that the treatment had a lifetime warranty, and that the crawl space would no longer have a moisture problem. The Salesperson denied ever making such statements to the Buyers. The Buyers never had the property inspected prior to closing. Following closing, the Buyers discovered structural problems which were traceable to the moisture in the crawl space. The Buyers spent over $20,000 remedying these problems and then filed a lawsuit against the Sellers alleging breach of contract and fraud. The trial court ruled in favor of the Sellers, and the Buyers appealed.

The Court of Appeals of Ohio, Twelfth District, affirmed the ruling of the trial court. The court considered the Buyers’ fraud allegations. The Ohio property condition disclosure law only requires sellers to disclose “material” defects which are within the Sellers’ own personal knowledge. The property condition disclosure law does not require the seller to inspect the property or conduct tests to discover potential problems which the seller is not aware of on the property. Here, the Sellers had acknowledged a past problem with the crawl but believed that the problem had been fixed. The Buyers also never had the home inspected prior to closing. The court ruled that the Sellers had not attempted to hide the crawl space’s dampness problem nor had they made any false representations to the Buyers. Thus, the court affirmed the lower court rulings in favor of the Sellers.

Next, the court considered whether the Sellers could be liable for the allegedly false statements made by the Salesperson. Ohio law provides that no client of a real estate licensee can be liable for a misrepresentation made by the licensee unless the client knows of the misrepresentation. Here, there was no evidence that the Sellers knew of the alleged misrepresentations made by the Salesperson. Since the Sellers did not know of the alleged misstatements by the Salesperson, the court ruled that the allegations against the Sellers should be dismissed. Thus, the court affirmed judgment in favor of the Sellers.

Clark v. Allen, 796 N.E.2d 965 (Ohio Ct. App. 2003).