Jacqueline and Thomas Onions hired real estate agent Laura Kopchynski to list their South Carolina property for sale. Sellers indicated in a Disclosure Form that there was no fungus at the property.
Laura quickly found buyers, who obtained an inspection report noting the ground is damp and not covered by a vapor barrier in a crawl space. The buyers then engaged Andy Ward, an exterminator, who found elevated moisture conditions of 20-25%, evidence of wood decay fungi and visible damage.
Sellers engaged a handyman to repair the crawl space, install a vapor barrier, and related work.
As closing approached, the first buyers hired other exterminators to prepare a report. Again, an elevated wood moisture content of 20-25% was found. For reasons unrelated to the property condition, the first buyers terminated their contract.
Laura went back to work and procured Rory and Kimberly Isaac as the next buyers. Laura offered to send the last inspection report to M/M Isaac, but their agent declined this offer. Regardless, Sellers furnished M/M Isaac with their previous Disclosure Form.
Seller’s previous Disclosure Form indicated the absence of fungus.
Sellers and M/M Isaac signed a contract. The new buyers hired an inspector, who noted there was no evidence of fungus and the moisture content was not excessive at 8-18%.
M/M Isaac closed on the Property. Two days later, heavy rainfall flooded the crawl space. M/M Isaac hired Andy to inspect it. Andy found moisture of 27-32%, active fungi, and related damage.
M/M Isaac asserted a claim against Laura for fraud, negligence, and negligent misrepresentation. The trial court granted summary judgment for Laura on all counts, noting that M/M Isaac had relied on their own inspection, which they had commissioned, when they closed the purchase. The trial court further determined that Buyers could not hold Laura responsible for inaccuracies in that report.
Buyers appealed.
The court of appeals reversed the judgment of the trial court regarding negligent misrepresentation and allowed M/M Isaac to prevail on that count.
So Laura appealed.
The Supreme Court started with an analysis of negligent misrepresentation. There are six elements that must be established: (1) defendant made a false representation to plaintiff; (2) defendant had a pecuniary interest in making the statement; (3) defendant owed a duty of care to communicate truthful information to plaintiff; (4) defendant breached that duty; (5) plaintiff justifiably relied on the representation; and (6) plaintiff was damaged as a result of reliance on the representation.
The Court then stated that “There is no liability for casual statements, representations as to matters of law, or matters which plaintiff could ascertain on his own in the exercise of due diligence” [italics added by yours truly].
As a real estate licensee, Laura owed a duty to M/M Isaac to be truthful. That duty, however, does not obligate Laura to inspect property to confirm or deny statements made by Sellers. And as a consequence, the Court determined that M/M Isaac cannot claim that they reasonably relied on any representation of Laura concerning the condition of the Property.
The judgment of the court of appeals is reversed. The judgment of the trial court is reinstated. Laura wins again. See Isaac v. Onions and Kopchynski; Supreme Court of South Carolina, Case 2023-001462; April 23, 2025: https://cases.justia.com/south-carolina/supreme-court/2025-28274.pdf?ts=1745419292.
Questions
/ Issues:
1. But Wait, What About the Duty to Disclose? Other States require the full disclosure of all material conditions and latent defects actually known to a licensee and principal. Was this duty adequately discharged here?
2. But Wait, Don’t REALTORS® Have a Duty to be Truthful? I don’t know if Laura is a REALTOR® or not; the fact that she is a South Carolina licensee does not necessarily mean she is also a member of the National Association of REALTORS® or one of its local boards. But if she is . . . then REALTORS® must be “honest and truthful in their real estate communications.” See Article 12, National Association of REALTORS® Code of Ethics and Standards of Practice effective January 1, 2025: https://www.nar.realtor/sites/default/files/2024-12/2025-COE-Standards-of-Practice-2024-12-24.pdf.
3. But Wait, Don’t REALTORS® Have a
Duty to Disclose all Pertinent Facts? REALTORS® must “avoid
misrepresentation or concealment of pertinent facts relating to the property or
the transaction.” However, REALTORS® do not have an obligation to discover
latent defects. See Article 2 and related Standards of Practice, National
Association of REALTORS® Code of Ethics and Standards of Practice effective
January 1, 2025: https://www.nar.realtor/sites/default/files/2024-12/2025-COE-Standards-of-Practice-2024-12-24.pdf.
Stuart A. Lautin, Esq.*
* Board Certified,
Commercial and Residential Real Estate Law,
Texas Board of Legal Specialization
Licensed
in the States of Texas and New York
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