You’re a successful and established business in your community. You want to take your business to the next level by buying the building in which you operate, saving on rent, a substantial monthly expense. Your trusted employee, someone you’ve known for years and even attended their wedding, offers to act as your real estate agent to facilitate the purchase. Naturally, you assume they’ll prioritize your best interests.
You’ve done your research, submitted a fair offer, and rely on your real estate agent to represent you. To your shock, you discover that your agent secretly purchased the property for the same price you offered, without disclosing their intentions.
To make matters worse, this property is crucial for your business because it’s where your restaurant operates, and now the new landlord—your former agent—wants to significantly increase your rent. This situation isn’t just absolutely unfair; it’s also illegal. Let’s break down the key issues and what you can do if you find yourself in a similar predicament.
The Impact on Your Business
In this example, the property in question was vital because it housed your restaurant. Owning the property would have allowed you to become your own landlord, saving money and securing long-term stability for your business. Instead, your agent’s actions placed you in a vulnerable position. For one, you were unjustly deprived of the chance to own the property and secure your business’s future. Secondly, the new landlord—your former employee—is now increasing your rent, adding financial strain to your operations. Your agent used their access to your financial information to gain an unfair advantage in the rent negotiation. They know your business inside and out, including your assets, liabilities, and how much you make each month. What they did was wrong, and they knew it.
Understanding Your Agent’s Fiduciary Duties and Ethical Obligations
Real estate agents are not just salespeople who help you buy property; they’re fiduciaries. This means they have a legal duty to act in your best interests, prioritizing your goals over their own. A fiduciary has a legal and ethical obligation to act in your best interest. It’s crucial to understand these duties to recognize when they’ve been violated. Their responsibilities include:
- Loyalty: Putting your interests first and avoiding conflicts of interest.
- Full Disclosure: Informing you of all material facts, including any personal interest they may have in the property.
- Good Faith and Fair Dealing: Acting honestly and transparently in all transactions.
In addition, they may owe you ethical duties, such as:
- Protecting and promoting your interests.
- Avoiding misrepresentation and concealment of pertinent facts.
- When buying or selling, making their position in the transaction or interest known.
- Disclosing present or contemplated interest in any property to all parties.
- Avoiding side deals without your informed consent.
- Communicating honestly and presenting a true picture in advertising, marketing, and other public representations.
- Avoiding unfair or deceptive and unconscionable trade practices.
- Providing written disclosure of any potential conflict of interest.
When your agent buys a property behind your back, they have violated these duties.
Conflict of Interest and Self-Dealing
In essence, conflict of interest arises when an agent’s personal interests clash with their obligation to you. In this scenario, your agent was both a competing buyer and someone who had insider knowledge of your bid and financial situation. This is known as self-dealing and is considered highly unethical and, in many cases, unlawful.
What You Need To Do
If you find yourself in a similar situation, the best thing to do is to contact an experienced attorney who can evaluate your case and help you pursue legal remedies. These remedies may include:
- Recovering Financial Losses: Compensation for increased rent or lost profits.
- Disgorgement of Profits: Forcing the agent to forfeit any financial gains from their improper actions.
- Specific Performance: In some cases, courts may require the agent to sell the property to you at the price you initially offered.
In addition, you or your lawyer should consider filing a complaint with your state’s real estate licensing board and professional associations, such as your local National Association of Realtors (NAR) division. These organizations can hold the at-fault party accountable for their actions.
Conclusion
Your real estate agent should act as your advocate, not your competitor. If you’ve experienced a breach of fiduciary duty, misrepresentation, or self-dealing, it’s essential to consult an attorney to explore your options. Taking the appropriate steps and seeking legal guidance can help you hold the agent accountable and safeguard your interests. Additionally, addressing such misconduct serves a broader purpose—protecting others in your community by exposing unethical practices and discouraging similar conducts in the future.
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