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When Documents In A Transaction Caution You To Get Legal Advice, Take The Hint; Otherwise, A Court May Not Provide Relief Later On if the Deal Goes Sour
In the case of Sharabianlou v. Karp, the parties entered into an agreement for the defendants to sell a building to the plaintiffs. The transaction failed and litigation followed. Among the claims made by the buyers was that their real estate broker breached his fiduciary duties and committed professional negligence (malpractice as a real estate broker) by failing to provide certain information and by failing to advise them to seek legal advice. The trial court rejected the claims and the court of appeal affirmed, relying in part on language in the contractual documents that stated in part: “Buyer and Seller are each advised to consult with technical and legal experts concerning the existence, testing , discovery, location, and evaluation of/or and risks posed by, environmentally hazardous substances, if any, located on or potentially affecting the Property.” The court also cited another clause which stated that buyers and sellers acknowledge and agree “. . . they will seek legal , tax, insurance, title and other desired assistance from appropriate professionals. Buyer and Seller further acknowledge and agree that “Brokers: . . . (iv) cannot verify inspection reports, square footage or representations of others; (v) cannot provide legal or tax advice; and (vi) will not provide other advice or information that exceeds the knowledge, education and experience required to obtain a real state license.” As if this were not enough, the contact also said in bold type: “A REAL ESTATE BROKER IS THE PERSON QUALIFIED TO ADVICE ON REAL ESTATE TRANSACTIONS. IF YOU DESIRE LEGAL OR TAX ADVICE, CONSULT AN APPROPRIATE PROFESSIONAL.” The court concluded that these clauses negated the claim of malpractice against the real estate broker. The lesson from this case is simple: if transactional documents caution you to seek legal, tax, environmental or other professional advice, seek it. And don’t ignore the warning and think you can state a later claim for negligence against a real estate broker. At least according to this case, you can’t do that. A complete copy of the decision in Sharabianlou v. Karp is attached for your convenience.