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With the rise of real estate activity in the region, I thought it was appropriate to touch on a recent Massachusetts Appeals Court case which landed a direct “hit” on the activities of real estate brokers, namely how brokers make representations in connection with for-sale listings of real property. The case is DeWolfe v. Hingham Centre, 80 Mass. App. Ct. 765 (2011).

In Dewolfe, the plaintiff wanted to purchase a piece of real estate where he could relocate his existing hair salon. After seeing a real estate listing in a local newspaper, the plaintiff became interested in the property at issue. The newspaper advertisement stated that the property was “[z]oned Business B” and provided the real estate broker’s name. The plaintiff called the real estate broker listed in the advertisement and was referred to the listing agent.

The plaintiff was shown the property twice. At the second showing the listing agent provided the plaintiff with a copy of the written multiple listing service (MLS) listing which stated that the property was zoned as “Business B.” The listing agent also provided the plaintiff with a copy of the relevant section of the controlling zoning ordinance, which ordinance stated that the plaintiff’s intended use (hair salon) was a so-called “Permitted Allowed Use” in “Business B.” At no point in time did the listing agent independently verify the zoning classification of the subject property. All representations regarding zoning were made based upon information allegedly provided by the seller.

The plaintiff and seller later signed a Greater Boston Real Estate Board (GBREB) standard form purchase and sale agreement which contained the following exculpatory language:

“The Buyer acknowledges that the Buyer has not been influenced to enter into this transaction nor has he relied upon any warranties or representations not set forth or incorporated in this agreement or previously made in writing, except for the following additional warranties, if any, made by the Seller or the Broker(s): None”

NOTE: Most standard forms of purchase and sale agreement modernly used contain the same or similar language.

The plaintiff later learned that the property was not zoned in a “Business B” district (but rather in a “Residential B” district) which inhibited the plaintiff’s use of the property for his intended purpose. The plaintiff sued the listing agent and real estate broker.

The trial court dismissed the case citing the exculpatory language from the standard form purchase and sale agreement excerpted above. The plaintiff timely appealed the trial court’s decision, wherein the Appeals Court reversed, holding that while the standard form language (excerpted above) disclaims any and all liability related to oral representations made by a real estate broker and/or listing agent, the disclaimer does not similarly extend to representations made by a real estate broker and/or listing agent if previously made in writing. (Emphasis added).

The Dewolfe decision stands for two things. First, that the exculpatory clause in the GBREB standard form purchase and sale agreements does not protect real estate brokers and/or listing agents against prior written representations. Second, in Massachusetts (and elsewhere) it is often best for real estate brokers, listing agents and/or sellers to remain silent on issues of uncertainty.

Jay R. Peabody, Esq., an attorney at Partridge Snow Hahn LLP, represents owners, developers and lenders in connection with the purchase, sale, planning, development, leasing and financing of commercial, industrial, retail and residential properties. (jrp@psh.com)

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