BRRETA and Broker Liability to Clients

The Brokerage Relationships in Real Estate Transactions Act (“BRRETA”) is a consumer protection state statute that governs the relationship between real estate brokers and consumers of real estate brokerage services in Georgia in order to protect both brokers and consumers from issues that may arise from time-to-time regarding the relationship between the two.  BRRETA states that if there is no written listing agreement or any other written agreement between a broker and a buyer or seller, the statute governs what duties the broker has to the client.

Section 10-6A-4(a) states, “A broker who performs brokerage services for a client or customer shall owe the client or customer only the duties and obligations set forth in this chapter, unless the parties expressly agree otherwise in a writing signed by the parties. A broker shall not be deemed to have a fiduciary relationship with any party or fiduciary obligations to any party but shall only be responsible for exercising reasonable care in the discharge of its specified duties as provided in this chapter and, in the case of a client, as specified in the brokerage engagement.”

Under this section, the default rule is that brokers owe their clients reasonable care and do not owe clients fiduciary duties, unless, of course, they so state in a written agreement executed by both parties.  In 2016, there was a “reasonable care” case decided by the Georgia Court of Appeals, RZI Properties, LLC vs. Southern REO Associates, LLC.  RZI, the buyer, wanted to purchase an REO asset owned by Suntrust.  The buyer and broker had a verbal agreement for the broker to represent the buyer.  The buyer testified that the obligations of the broker were “to perform or provide all necessary paperwork as requested by the Seller[,] …to promptly notify [him] if anything was needed from [him], and to timely notify [him] of any and all communications from the Seller.”

Suntrust rejected the buyer’s offer because the buyer’s Proof of Funds was older than thirty (30) days.  There was a deadline of January 13 to get the updated Proof of Funds to Suntrust.  Suntrust gave the buyer an extension of time to January 17 in which to get an updated Proof of Funds.  At 3:02, the seller e-mailed the broker and said since the buyer had not provided Suntrust with an updated Proof of Funds, the deal was dead.  The record before the court did not establish whether the broker informed the buyer of the original deadline and the extension.  The trial court ruled in favor of the broker that the broker had not breached the reasonable care it owed the buyer.  The court of appeals reversed, saying there is a question of fact of whether the broker had informed the buyer of the deadline and extension that required a trial.

Since there was no written agreement, the buyer was a “customer” and the broker was a “transaction broker” performing “ministerial acts” for the customer.  Customer, Transaction Broker, and Ministerial Acts are all defined in BRRETA.  Ministerial acts are those acts that do not require professional judgment or skill.  The question for determination of liability was whether the ministerial act of informing the buyer of the deadlines was done by the broker or not.  If not, the broker is looking at being liable for not exercising reasonable care in carrying out the ministerial act of informing the buyer of the deadlines.  If the broker did make the disclosures, there should not be liability to the broker.

The moral of the story is that just because a broker is serving as a Transaction Broker, they should not ignore what is required of them, especially disclosing any deadlines their customer has to meet.  In law, deadlines are potentially fatal to a party.