File a Frivolous Real Estate Lawsuit? Think Again.

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Buyers might want to think twice before filing a frivolous real estate lawsuit.

Real Estate lawsuit
Beware Frivolous Lawsuits

I recall many years ago when one of our agents wrote up a listing agreement that I, as broker, rejected. It was neither a listing nor a client I wished to represent. I refused to sign the agreement and politely suggested these sellers find more suitable representation.

Within a couple of weeks, I had a letter from an attorney requesting damages of $50,000 on behalf of the client we never represented. Furious, I paid our attorney to write an appropriate response–and litigation never went anywhere.

But, our courts are too often burdened with frivolous lawsuits that can run up enormous legal fees on both sides.

This morning, I read an article in Realty Times that should give honest sellers and their agents hope for relief from meritless litigation.

In this particular California case, the buyer bought a home in 2008 and in 2010 discovered water intrusion had caused damage to the foundation and attached flooring structures. The buyer and her attorney sued the sellers, their agent, the termite inspector and home inspector. It was the real estate agent’s attorney who saved the day for all, though.

It turned out to be a “frivolous” lawsuit, though, because the sellers and their agent had disclosed prior drainage issues and a “soft spot” in the bedroom flooring.

None of these issues were concealed from the home buyer.

And there was signed documentation showing these disclosures and buyers acceptance of same–all of which were emailed to buyer’s attorney, who still proceeded with litigation. The agent’s attorney countersued, and ultimately was awarded, by the Appellate Court, $60,000 for attorney fees to be paid by buyer and her attorney. It seems the agent and his attorney had repeatedly provided documentation countering the charges and had repeatedly asked that the suit be dropped.

From Realty Times:

The Carr McClellan Law Blog (June 30, 2014) nicely summarizes the potential importance of this case:

“It is common practice for parties to “blame the agents” when a transaction sours, just to have another source of settlement funds. Defending these claims is expensive and the agents rarely recover their cost of defense. The Peake case teaches that the agent’s attorney should weigh in early and often with emails and letters showing why the claims are baseless. These communications should demand that the claims be withdrawn or sanctions will be requested. That used to be an idle threat, but after the Peake decision, complaining parties (and their attorneys) will have to weigh whether they will be the ones making the payment at the end of the day.”

In our San Diego real estate practice, we at San Diego Previews Real Estate make it a practice to disclose as much as we possibly can about a property under contract and most reputable agents with whom we deal operate the same way. Were this not the case, San Diego home sales would be in a perilous position!

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