FACTS: A broker is instructed by her seller-client to hire a vendor to measure her property. The vendor indicates that the property has 2,619 square feet of permitted space and 1,001 square feet of an unpermitted in-law suite. The broker represents that the property has 3,620 square feet in the MLS, which includes the unpermitted in-law suite.
The seller-client enters into a contract with a buyer and accepts a back-up contract on the property. Buyer #1 terminates the contract due to financing during the due diligence period. Buyer #2 hires a vendor to conduct a property inspection. During the inspection, Buyer #2 is informed that the in-law suite is unpermitted and terminates the contract due to misrepresentation. The broker fails to revise the MLS listing after both Buyer #1 and Buyer #2 terminate their respective contracts.
ISSUE: Is it mandatory under Commission rules for a broker to state the square footage of a property in a listing? Did the broker fulfill their duties?
ANALYSIS: No, and no. Brokers are not required by License Law and Commission rules to report the square footage of properties offered for sale (or rent); however, when they do report square footage, the information they provide must be accurate. The Commission clarifies this position in their resource entitled, Residential Square Footage Guidelines. These guidelines also assist brokers with how to measure, calculate, and report (both orally and in writing) the living area contained in detached and attached single-family residential dwellings.
The Commission is aware that brokers who are members of a professional trade association may be required to report the square footage of a property in a listing. Therefore, the Commission recommends brokers to carefully follow the Residential Square Footage Guidelines or any other standards that are comparable to them, including those approved by the American National Standards Institute, Inc. (ANSI) which are recognized by the Commission as comparable standards. Further, brokers should be aware of the standards a vendor may use and the differences within the standards when they are hired to measure a property.
In the scenario above, the broker should include the unpermitted section within the property separately and disclose it to all parties in writing. Written disclosure ensures brokers are not misrepresenting the property and/or misleading the buyer. Buyers should be made aware of the unpermitted section’s size and location in the property as well. Essentially, brokers should clearly identify unpermitted space within a property in the listing description.
If a broker makes any willful or negligent misrepresentation or pursues a course of misrepresentation through advertising, they may be subject to disciplinary action by the Commission. For example, if the advertised square footage is wrong, the listing agent and firm may be held responsible. Further, per Rule 58A .0110, the BIC is responsible for all advertising, so they too may be subject to disciplinary action.
RESOURCES:
N.C.G.S. § 93A-6(a)(1), N.C.G.S. § 93A-6(a)(8), and 93A-6(a)(10)
License Law and Commission Rules: 58A .0110
Articles: 2022-2023 Update Course Section, “Material Facts: Speak Up”
Residential Square Footage Guidelines
Your Square Footage Measurement Must Be Right When Listing a Property