Dual Agency on Agricultural Land Deal proves to be Risky Business

Land for Sale

A spotlight on a claim against a real estate agent who acted as a dual agent for both the seller and the buyer of 1000 acres of agricultural land for $10 million dollars ($10,000 per acre).

Fact Scenario:

Prior to the sale, the seller told the agent that the property line was his fence surrounding all 1000 acres. The agent relayed that information to the buyer. The buyer never ordered a survey despite being told to do so by the agent. None of these communications were in writing.

After the sale of the land, the buyer began planting orange trees within the fence lines surrounding the property for his business. Soon after the buyer starting planting, a neighbor to the north complained that the buyer was planting on 100 acres of his property that was within the fence boundary.

The buyer refused to stop planting and continued to develop the disputed property. The neighbor filed a lawsuit against the buyer to quiet title and for trespass. The buyer and the seller filed cross complaints against each other and the agent and his brokerage.

The buyer said he was told that the property line was the fence. The seller said he never told the agent that the property line was the fence. Both the buyer and the seller independently accused the agent of not looking out for their respective interests to help facilitate the sale and earn both commissions for himself.

In addition, the damages for the buyer were not just for the potential loss of 100 acres, they also included the lost revenue for the crop planted on the disputed property line. The buyer claimed that the combination of lost property and revenue was two times the original purchase price per acre. The lack of documentation and the $2 million dollars in damages made the case difficult to settle and very expensive for all parties to defend.

Result:

Ultimately, after a bench trial, the court found that the disputed property belonged to the neighbor. The court noted that the neighbor had been paying taxes on the disputed land.

However, the court split the buyer’s damages three ways ($666K each) between the agent, the seller and the buyer. The judge found the seller at fault for not being clear about the property line in light of his fence on his neighbor’s property, the buyer at fault for not purchasing a survey and the agent for not documenting all communications about the property line and survey.

Best Risk Management Practices:

In cases of dual agency, an agent has duties to both the seller and the buyer. It is incumbent upon an agent to thoroughly document all communications. Any doubts as to what was communicated to the parties will be construed against the agent.

*Charlton-Perrin, Gawain, “Real Estate Agent Claim Spotlight: Helping Real Estate Professionals Manage Their Claim Exposures,” Hanover Insurance Group, November 2017.