Oct. 8, 2005 - Case #1-25: Disclosure of Latent Defects

Case #1-25: Disclosure of Latent Defects
(Adopted November, 2000.)

REALTORŪ A had listed Seller Ss vintage home. Buyer B made a purchase offer that was contingent on a home inspection. The home inspection disclosed that the gas furnace was in need of replacement because unacceptable levels of carbon monoxide were being emitted.

Based on the home inspectors report, Buyer B chose not to proceed with the purchase.

REALTORŪ A told Seller S that the condition of the furnace and the risk that it posed to the homes inhabitants would need to be disclosed to other potential purchasers. Seller S disagreed and instructed REALTORŪ A not to say anything about the furnace to other potential purchasers. REALTORŪ A replied that was an instruction he could not follow so REALTORŪ A and Seller S terminated the listing agreement.

Three months later, REALTORŪ A noticed that Seller Ss home was back on the market, this time listed with REALTORŪ Z. His curiosity piqued, REALTORŪ A phoned REALTORŪ Z and asked whether there was a new furnace in the home. Why no, said REALTORŪ Z. Why do you ask? REALTORŪ A told REALTORŪ Z about the home inspectors earlier findings and suggested that REALTORŪ Z check with the seller to see if repairs had been made.

When REALTORŪ Z raised the question with Seller S, Seller S was irate. Thats none of his business, said Seller S who became even angrier when REALTORŪ Z advised him that potential purchasers would have to be told about the condition of the furnace since it posed a serious potential health risk.

Seller S filed an ethics complaint against REALTORŪ A alleging that the physical condition of his property was confidential; that REALTORŪ A had an ongoing duty to respect confidential information gained in the course of their relationship; and that REALTORŪ A had breached Seller Ss confidence by sharing information about the furnace with REALTORŪ Z.

The Hearing Panel disagreed with Seller Ss contentions. It noted that while REALTORSŪ do, in fact, have an obligation to preserve confidential information gained in the course of any relationship with the client, Standard of Practice 1-9 specifically provides that latent material defects are not considered confidential information under the Code of Ethics. Consequently, REALTORŪ As disclosure did not violate Article 1 of the Code of Ethics.

Apr. 4, 2006 - whose business is who's