A broker is responsible for his representations.

What is the responsibility of a real estate broker who makes representations regarding the property he sells? The question is answered by Judge Thomas Dickerson of Yonkers City Court in the case of Gutterman v. Romano Real Estate (NYLJ. October 28, 1998, P36, C3).

The plaintiff, Garry Gutterman, found his dream house in Yonkers, NY, after reading an advertisement in a local real estate magazine. Gutterman contacted the advertised broker, Romano Real Estate, and was impressed by the reputation of the broker, who "for over 25 years served lower Westchester." Romano introduced Gutterman to the Lakeview House, which he purchased.

Romano was retained by the owners of the Lakeview House to sell it. Romano prepared a form description of the Lakeview House, which contained the representation that the house was connected to a city sewer system. The form also contained disclaimers that the data contained therein was believed by the broker to be accurate, but that the information was not warranted, and that all data was subject to verification.

Gutterman lived in the house for one year in peace and serenity. This came to an end when toilets backed up, spewing forth a most unpleasant mess. Gutterman called Roto Rooter, whose servicemen asked whether there was a septic tank or a sewer connection. Gutterman assured him that the Lakeview House was attached to a sewer system, and based upon that information, Roto Rooter dug up the back yard looking for a leaking sewer pipe. What was found however, was a septic tank so full that the toilets had backed up. Gutterman then hired a tank service to empty the septic tank.

Gutterman then sued Romano claiming: (1) fraudulent misrepresentation by Romano; (2) negligent misrepresentation; and (3) violation of the New York General Business Law [section]349, which deals with the deceptive and misleading practices.

At the trial, Romano claimed that the description form was prepared on the basis of facts given Romano by the seller of the house, and that there was cautionary language in the form alerting the purchaser that the data was simply believed to be accurate and was not warranted. In addition, Romano claimed that Gutterman signed the purchase agreement for the house which stated that he was accepting the house "as is," and that all representations previously made were merged in the deed and would not survive the closing transaction.

Gutterman claimed that he relied upon the description form that stated that the Lakeview House was connected to a sewer system. Gutterman testified that he took reasonable efforts to inspect the Lakeview House himself prior to signing the purchase agreement. He hired a consulting engineer who inspected the house and rendered a report which stated that it was in good condition, but was silent about a sewer connection. The report stated buried equipment such as septic tanks would not be inspected because digging would be required. The report would cover only those portions of the premises which are capable of being visually inspected.

Judge Dickerson found Romano to be liable for the damages sustained by Gutterman. The Judge found that in Yonkers, house seekers prefer not to buy a home with a septic tank, since the vast majority of system. It is for this reason that sellers and real estate brokers frequently conceal the existence of a septic tank or otherwise misrepresent the nature of the sewage disposing system. The broker in this case therefore had a duty to verify the existence of the sewer system.

The Court also held that Gutterman acted reasonably in relying upon Romano's misrepresentations of a sewer connection. After all, Gutterman did engage an engineer to evaluate the property before he entered into the contract to purchase the property. However, the most meticulous inspection (without digging or otherwise disrupting the property) would not have revealed the presence of the septic tank. Romano could not rely upon the caveat contained in the information form that the data is only believed to be accurate but is not warranted. Disclaimers of this nature do not protect parties from their own fraud or negligence or their violation of the consumer protection statute, New York General Business Law [section]349. An expressed disclaimer will not be given effect where the facts are particularly in the knowledge of the party invoking it.

The Court ruled that the broker is liable for the misrepresentation because Romano was aware that the information form would be relied upon by Gutterman. Since Romano knew or should have known more about the house than Gutterman did, Romano had to exercise reasonable care to verify the truth of the statements in the information form. Gutterman, as a prospective purchaser, had a right to assume that the broker would not make assurances without knowledge of their truth.

Judge Dickerson held that accurate and complete information is critical to a home-buyer in making an informed decision to purchase a home. Buying a house is the single most important economic decision most families will ever make. Licensed real estate brokers hold themselves out to be professionals ready to render accurate information which they know will be relied upon. Assuming the title and status of a "professional" brings with it a higher standard of care than may be otherwise be acceptable to the seller of goods and services.

Romano, as a professional real estate broker having sold houses in the City of Yonkers for over 25 years, had a duty to investigate and determine the truth and accuracy of written representations made to Gutterman. Romano breached its duty and therefore is liable for all reasonable damages arising therefrom.

The Court further noted that while the New York State Department of State, which regulates real estate brokers, has advised that "it is not the duty of the broker to verify all representations made by the owner," in this case, the broker had reason to know that the owner made misrepresentations, and it was the broker's duty not to perpetuate such misrepresentations.

Judge Dickerson further ruled that Romano violated General Business Law [section]349, which imposes liability if the practice was deceptive or misleading in a material respect, and causes damage, even if such practice was not intentionally deceptive. The written misrepresentation in the information form as to the sewer connection - which was false, misleading and deceptive - caused damage to Gutterman.

The Court ordered Romano to pay damages for the cost of Roto Rooter services of $1,156.55 and the repairing of the brick wall and back yard of $2,902. This sum, however, was limited to a total of $3,000, which was the jurisdiction limit of the Court. The Court also found that Romano willfully violated GBL [section]349 and would have awarded Gutterman treble damages as the law allows, except such damage would also have exceeded the jurisdiction of the Court.

It is well to note that the representations of a real estate broker as to the condition of the property it sells must be carefully reviewed and verified. Reliance upon information supplied by the seller will not be sufficient to protect the broker from liability if the facts prove to be substantially incorrect.