Video – Attorney Andre Clark Explains Why Fraud Is A Common Issue In Real Estate Litigation

Ray Hrdlicka – Host – Attorneys.Media

“Can you claim, among real estate litigation, fraud?”

Andre Clark – Real Estate Attorney – Los Angeles/San Bernardino County, CA

“Okay. Real estate litigation is a broad topic. If you are suing another owner because you guys dispute over title, you may claim that they defrauded you in order to give title. So, fraud can come up in a quiet title action. Fraud also comes up when, as you said, in a lot of real estate transactions. And I agree that, probably most real estate transactions in California, there is at least one broker involved, because you can act as a dual agent in California.

Brokers are subject to common law fiduciary duty and a statutory duty. And some of those duties require disclosure of the scope of the agency, disclosure of the condition of the property, prior to inspection. And when you have disclosure, statutory disclosures that are not made, real estate agents are subject to what’s called constructive fraud. So, even just a breach of fiduciary duty, without the intent to defraud, without the intentional misrepresentation of some of the other elements that you usually have to prove for fraud, professionals, like real estate agents and lawyers, are held to a higher standard. Where, if they don’t disclose certain things in the process of doing their job. they can be considered liable for fraud.

So, fraud comes in intentional misrepresentation, negligent misrepresentation. It’s not always there. It often is a good claim against real estate agents and brokers, because it’s the nature of the business. They have so many requirements that they have to follow. And then it comes up in contract formation.

So, most…lot of real estate transactions involve contracts. Somebody tells you… misrepresents facts to you, and you rely on those facts in entering into the contract. You could say that they defrauded you, and had they told you the right information, that may have changed the desirability or your desire to enter into the transaction. And therefore, you lost money.

And the reason why fraud comes up that way is because that’s really the only way to reverse a bad real estate transaction. Meaning, the courts do not like to reverse title. After title changes, markets fluctuate. You have to record it through the title system. And that’s a system that… our law is made off of property law. So, that title system is very important, and it’s not easy to just reverse a transaction. And generally, transactions won’t get reversed unless you can prove fraud in the formation. And even then, after years of litigation, is often not even practical.

So, fraud… fraud comes up to try to reverse real estate transactions or challenge real estate agents. And it’s often thrown in with a breach of contract case. But it doesn’t necessarily have to be against a real estate agent, and it doesn’t always come up.”