Open House = Open to Liability? Broker Liability to Open House Attendees
Open houses and showings are a critical part of any real estate broker’s job. More often than not, prospective buyers want to look at the property before committing. But what happens when a prospective buyer is injured while touring a property? Does a listing agreement impose a duty upon a real estate agent to ensure a property is safe before showing it? Is a listing agent a legitimate target of an injured open house guest? Nope, according to a recent decision out of Illinois. But that is not always the case.
In Hart v. Century 21, the plaintiff alleged that the listing agent was liable for injuries he sustained from a collapsed staircase in an open house tour. The Court held that the listing agreement between the defendant broker and the seller did not create a duty for the agent to inspect the premises for safety hazards to protect potential buyers. The Court’s decision was based heavily on the documents that created the listing agreement: “The language of the contract itself…controls whether a contractual duty to this plaintiff exists as a matter of law.”
These documents stipulated that the agent was responsible only for limited cleaning, but not inspection of the house. Further, the agreement stipulated that the agent, as broker, must “take all appropriate precautions to ensure the health and safety of Broker, Broker Personnel and Vendors.” Based on this language, the plaintiff averred that the broker also owed a duty to a prospective buyer. The Court rejected this argument, instead holding that because the agent had no interest in the ownership, operation, or maintenance of the premises and no contractual undertaking to buyers, there was no duty to the prospective buyer.
Brokers are not always off the hook, however. While a standard listing contract includes a “hold harmless” provision that stipulates the broker is not liable for any losses or liability resulting from personal injury, property damage or theft occurring during showings or open houses, and may also stipulate that the owner is responsible for preparing the property for showings in order to minimize the likelihood of liability, these protections do not eliminate all risk.
Some agreements hold brokers liable for their own acts of negligence or intentional wrongdoing. These acts of negligence can be obvious – a broker accidentally bumps into the prospective buyer, causing the latter to fall. Less obvious liability risks are those that involve passive negligence, where a broker fails to act, resulting in injury to a prospective buyer. Passive negligence may occur when a broker fails to warn a potential buyer of a known dangerous condition existing on the property, such as an icy sidewalk or a loose banister rail. If a broker knew or should have known of such a dangerous condition, liability can result.
In addition to any duties imposed by the listing agreement, brokers also owe a common law duty of ordinary care to prospective buyers. This duty of care varies from case to case, but a broker hosting an open house must always take reasonable precautions to ensure reduce the risk of injury. When a person is considered an expert, as might be the case with a real estate practitioner showing a property, a more demanding duty of care is imposed. This duty requires that the expert use special skills, knowledge, or abilities to be aware of risks and potential hazards and to inform others of those risks in order to prevent injury.
Here are some tips to avoid to avoid similar situations in your own practice, the language of any listing agreement is paramount.
- Know the documents. The language of the listing agreement is paramount, and will inform you of the respective responsibilities of you and the seller.
- Investigate and inspect. Examine the property for potential safety hazards. Post warnings in the property description in the MLS and mark the area with a prominent warning sign. Encourage the seller to fix any hazards before showings commence.
- Showtime! Your role as safety monitor does not end when the showing begins. Make sure children are closely monitored. Arrange to confine any of seller’s pets during showings. Remove rugs and do not light candles. Open exterior doors for clients yourself and advise them not to open windows.
- Put it in writing. Disclose all potential dangerous conditions to potential buyers in any written materials you distribute. This may sound extreme, so weigh the options – buyers may be deterred, but only a written disclosure offers absolute proof you provided a warning.
- Insure. Accidents happen. Check your policy or contact your insurance agent to determine what type of insurance is best for you.