DeWolfe v. Hingham Ctr., Ltd. - 464 Mass. 795, 985 N.E.2d 1187 (2013)

Rule:

Pursuant to the common-law doctrine of negligent misrepresentation, a real estate broker, like any person engaged in the course of his business, may be liable for failing to exercise reasonable care in making representations to prospective buyers. While a broker ordinarily may rely on information provided by the seller in making representations about a property, a broker is not insulated from all liability merely by virtue of such reliance. The critical question is whether the broker failed to exercise reasonable care or competence in obtaining or communicating the information. Where it is reasonable in the circumstances for a broker to rely on information provided by the seller, the broker will not be liable for conveying such information to prospective buyers without conducting further investigation. By contrast, where it is unreasonable in the circumstances for a broker to rely on information provided by the seller, the broker has a duty to investigate further before conveying such information to prospective buyers.

Facts:

The property owners retained Richards and Hingham Centre to list the property and broker it for sale. The owners told Richards either that the property was zoned "Residential Business B" or that it was zoned "Business B." However, "Residential Business B” was not a zoning designation in Norwell. Richards subsequently advertised the property in at least two newspapers as being zoned "Business B." Plaintiff purchaser, DeWolfe, purchased the property after having received the incorrect information and was thereafter unable to use the property as he had intended. Subsequently, plaintiff filed the present action against Richards and Hingham Centre, alleging misrepresentation and violation of G. L. c. 93A, § 2. Richards and Hingham Centre moved for summary judgment. A Superior Court judge granted the defendants' motion. Upon plaintiff’s appeal, the Appeals Court vacated the judgment and remanded the case for further proceedings. Defendants appealed. 

Issue:

Did the defendants have a duty to exercise reasonable care in making representations as to a property's zoning designation? 

Answer:

Yes.

Conclusion:

The supreme court concluded that real estate brokers had a duty to exercise reasonable care in making representations as to a property's zoning designation. Where misrepresentations were based on information provided by the seller, the question turned on whether it was reasonable in the circumstances to rely upon such information, a question to be determined by the trier of fact. The supreme court found that because of a broker's duty of reasonable care, and because the evidence could support a finding that defendant broker did not exercise such care when she represented the property as zoned "Business B," defendants failed to establish that they were entitled on this basis to judgment as a matter of law. The supreme court further concluded that an exculpatory clause in the purchase and sale agreement did not preclude the buyer's reliance on prior written representations. Defendants had not satisfied their burden of establishing an entitlement to judgment as a matter of law.