By: Marilyn E. Tomei, Assistant Legal Counsel
When you are listing property for sale or for rent, you should verify certain information through a reliable source before you pass it on to parties in the transaction and thereby avoid possible allegations of misrepresentation. Examples of information which should be verified include lot acreage and frontage, land use restrictions and square footage.
If you decide to advertise physical features of land - such as lot acreage and frontage - you should take steps to ensure that your representations are accurate. Physical features should be verified through public records such as tax maps and recorded plats, or alternatively through unrecorded surveys.
A tax map is not intended to be used for legal description and should not be relied on exclusively, but it can be a good starting point. If the property is in a subdivision, a plat of the entire subdivision is probably recorded, and can be obtained from the county register of deeds.
If a previous purchase of the property was financed by a commercial lender, the lender probably required a survey. In the event that the survey was not recorded, you may be able to obtain a copy of it from the surveyor at a nominal cost. Other possible sources are the lender, closing attorney or seller.
When you have a deed, you may generate the information on your own by computer. Programs are available which print a sketch of the property and give you its area in square feet or acres, when you input the metes and bounds description.
In addition to physical features, other representations which can and should be verified include zoning/subdivision ordinances and restrictive covenants or deed restrictions and how they may affect the use or development potential of the property, and sewage disposal regulations and permit information.
Consult public agencies and public records concerning restrictions on the use of property imposed by zoning and subdivision ordinances, which are under the jurisdiction of the city and/or county planning department. Zoning maps (often collectively called the zoning "atlas") are available for public inspection, usually in the planning department, which also maintains records of subdivision approval applications.
You should also be aware that privately-imposed land use regulations such as restrictive covenants may affect the use of the property. They generally impose even stricter limitations than do zoning and subdivision ordinances and often apply in singlefamily subdivisions and condominium and townhouse developments. Examples of restrictive covenants are the prohibition of commercial uses of a residential property, the requirement that original buildings or later additions conform to a general plan and be reviewed by a committee, and the requirement that property owners pay for maintenance of common areas and private roads.
Private land use restrictions can also be found in individual deeds. An example of such a restriction is the stipulation by a donor that property is given to a church, but only so long as it is used for church purposes. Otherwise, the property will revert to the original owner or his successors. Such a restriction runs with the land and applies to every owner of the property in the chain of title after the deed containing the restriction has been recorded. It is therefore important for all agents in the transaction to have this information. Deeds and restrictive covenants are recorded in the county register of deeds office.
The Commission does not expect licensees to search titles or to find and be familiar with all deed restrictions or restrictive covenants. However, you do have a duty to alert parties in the transaction that they may exist. If a buyer alerts you of a need to use the property in a special way, advise the buyer to investigate possible restrictions on the use of the property before becoming obligated to purchase it.
For example, you should be aware that the operation of a professional office at a residential property might be prohibited or severely restricted by zoning or restrictive covenants or both. Therefore, if you represent a buyer who wishes to operate an accounting business at home, you should caution the accountant-buyer about the possible public and private land use restrictions, and advise him or her to thoroughly research such restrictions before selecting and contracting to buy a home. Refer the party to a private attorney for further information.
Other common commercial enterprises operated at home which should alert licensees to public or private land use restrictions are day-care centers (which are regulated at the state level as well), businesses which sell craft or hobby items, and catering services (which may also be regulated by the health department).
Concerning restrictions on land use imposed by sewage disposal regulations administered by local health departments, see Real Estate Bulletin, Vol. 24, Nos. 1 and 3 (Spring and Fall 1993).
Negligent misrepresentation of building square footage is among the most common misrepresentation complaints the Commission investigates. When listing property, you should personally measure the square footage of buildings. Never rely on the seller's representation of square footage, or on a previous listing agent's figures. That agent may not have measured accurately - or at all!
Alternatively, you can usually rely on an appraiser's report as to square footage. But, review it carefully to confirm that no additions or other modifications affecting square footage have been made to the structure since the appraisal. If you find any, you must make additional calculations.
An appraisal report is usually available, especially if the property has been recently purchased or refinanced, because a commercial lender generally requires an appraisal. Even though the appraiser's client is usually the lender, you can obtain a copy of the report from the borrower (who is now the seller or landlord), since he or she is entitled to one.
Don't rely on house plan drawings, however, because the finished product sometimes differs from the plans. Also, do not rely on tax records. Although the tax office appraises property, it does so on a mass scale; therefore, its calculations may not be exact and are not a reliable source of square footage information for real estate transaction purposes.
Representing the square footage of properties accurately is an important component of keeping your clients and customers satisfied. The typical home buyer has both a financial and psychological interest in the square footage of the property. If a purchaser discovers after closing that the property has less living space than was originally represented, that purchaser will certainly be disappointed. This may cause him to demand a reduction in the purchase price, which may in turn result in complaints to the Real Estate Commission from both the purchaser and seller.
Whether the buyer is entitled to a reduction in the purchase price is a question for a civil court, but you will better serve your clients, your customers and yourself if you provide them with correct information from the beginning of the transaction.
Accurate square footage information is also important in commercial lease transactions where rents are often based on a set price per square foot. Many licensees feel safe by underestimating square footage. However, if you underestimate square footage, your landlord client will not get the full benefit of the lease contract. To avoid any misunderstanding, be sure that both the landlord and the client understand how the square footage is measured and calculated.
When you are the selling agent in a transaction, you should exercise caution when using property information provided by the listing agent. The selling agent may not rely on a listing agent's representation and repeat it to others when the agent knows or should know that the representation is wrong. A selling agent who passes along inaccurate information may be guilty of negligent misrepresentation.
Consequently, if you suspect inaccuracies in any representations made by the listing agent, you should verify the information by one of the methods already discussed. Or, you can alert the parties to the fact that the listing agent's representation is probably incorrect, and advise them how to confirm the information. You may want to put this alert in writing, so there can be no doubt that you have discharged your duty.
Be conscious of possible errors in property information provided by anyone else in a real estate transaction. And, be sure of the accuracy of such information before you repeat it to other parties. By doing so, you may be saving yourself the inconvenience and anguish of a complaint, and you will most certainly be serving your clients and customers more effectively.