Victory for REALTORS® in Iowa Supreme Court Case

Iowa real estate professionals are collectively breathing a sigh of relief in light of the Iowa Supreme Court’s opinion issued on June 10, 2022, in an appellate case where the Iowa Association of REALTORS® and National Association of REALTORS®, represented by attorney Jodie McDougal at Fredrikson & Byron, were granted permission to file an amicus curiae brief.

On appeal was a district court decision where the district court had held that listing agents can be held liable for injuries that occur on the listed property, even when the listing agent is never present at the property and has no knowledge of the condition of the property. This holding could have had a substantial effect on the thousands of real estate professionals across the state if affirmed on appeal. Accordingly, state and national associations took notice of the case and provided their perspective to the Iowa Supreme Court through an amici curiae brief.

The underlying case and Iowa Supreme Court opinion are detailed below. As detailed below, the Iowa Supreme Court ultimately agreed with the Associations, reversed the district court’s decision, and held that:

A listing agent who is not present and whose role is limited to granting access does not normally owe a duty of due care to persons viewing the property. (Opinion at p. 17)

As discussed below, the Court reviewed the specific facts of the case in making that conclusion. Thus, the facts of a different situation may result in a different outcome, so real estate professionals need to be aware of what they can do to help minimize the risks of being held liable for injuries of prospective buyers and their agents and consult their legal counsel regarding specific risk mitigation actions.

What were the underlying facts of the case?

Amanda DeSousa was a prospective buyer interested in a house being listed by an Iowa Realty agent. The house was owned by Melissa and Matthew Fynaardt, who no longer lived there and had moved to their new residence. On December 27, 2020, Ms. DeSousa’s agent, as is commonplace, requested a private tour of the house for the next day using a mobile app and without speaking to the listing agent. The private tour request was approved through the app, and the buyer’s agent would be able to access the house through the lockbox containing the key and without assistance from the listing agent.

On the morning of December 28, in the middle of a winter storm, Ms. DeSousa and her agent arrived at the house for their private tour. As Ms. DeSousa stepped out of her car onto the icy driveway, she slipped and fell.

What happened next?

Ms. DeSousa sued the homeowners of the house, the Fynnardts. Surprising everyone, Ms. DeSousa also filed suit against Iowa Realty, alleging it was somehow liable merely because the house was listed by an Iowa Realty agent.

During the litigation, and in another surprising development, the district court entered a ruling (in response to Iowa Realty’s motion for summary judgment), recognizing that a listing agent may in fact have a legal duty to essentially ensure the safety of all prospective buyers visiting the house, regardless of whether the listing agent is ever present at the house. In May of 2021, Iowa Realty appealed that ruling.

What was the response from industry associations?

Both the Iowa Association of REALTORS® and the National Association of REALTORS® immediately recognized that this case could have a significant impact on the real estate industry and filed a motion with the Iowa Supreme Court, which was granted, to file an amicus curiae brief. Appellate courts generally allow non-parties with unique perspectives on the issues before the court, such as industry associations, to file a brief as an amicus curiae, Latin for “a friend of the court.” The Associations, represented by attorney Jodie McDougal at Fredrikson & Byron, prepared and filed an extensive amicus curiae brief to provide further legal and public policy arguments to the Court.

Why is this case significant to the industry?

Importantly, the prospective buyer and her agent did not speak to or interact with the Iowa Realty listing agent on the day of the incident, and there is no evidence that the listing agent was even notified of the private showing. Instead, the prospective buyer and her agent chose to take a private tour of the house (in the middle of a winter storm), with the listing agent not being on site before, during or after the showing.

As we know, this fact pattern is extremely typical for the industry. Today’s modern system of private showings, virtual scheduling of showings and lockboxes is efficient and convenient for all involved and allows greater flexibility, privacy and health/safety protection for prospective buyers.

The district court’s ruling, exposing real estate licensees to new liability, was contrary to the existing case law, as well as public policy considerations. If the ruling were to be upheld, the entire home-buying industry would be adversely affected, ultimately leading to decreased efficiencies on the part of sellers and buyers and increased costs to consumers who are buying and/or selling a home, as well as potentially forcing listing agents to hire third-party professionals to inspect homes prior to every showing to ensure no hazards are present.

What was the Iowa Supreme Court’s decision on appeal?

On June 10, 2022, the Iowa Supreme Court issued its in this matter. In its opinion, the Iowa Supreme Court agreed with the Associations and reversed the district court’s opinion.

On the issue of control, the Court reasoned as follows:

Applying the control principle in this case, we conclude that Iowa Realty’s role in selling the Fynaardt home did not entitle the brokerage or its agents to occupy or control the property—and they did not occupy or control the property in fact.(Opinion at p. 12)

The Court noted that such reasoning was in accord with several courts around the nation which “have held that real estate agents do not control property and do not owe a duty of care to entrants on the property when they are merely contracted to aid in a sale.” The Court also noted that “having a right to enter property is not the equivalent of possession or control,” and “scheduling a time for a potential buyer and their agent to visit the home does not require a transfer of control.”

Also, as part of its opinion, the Iowa Supreme Court cited to the policy considerations set forth in the Associations amicus curiae brief, stating as follows:

Or consider how real estate agents would have to change how they do business. Typically, once the seller’s agent gives permission to view the property, there is a lockbox on the property to which the buyer’s agent is given access. This saves the agents for both parties a lot of time and effort. But if the seller’s agent is going to be legally liable for conditions on the property, the seller’s agent will certainly want tighter control over who is on the property and exactly when.

To impose a duty on selling agents would require them to make frequent inspections for hazards lest they risk being found liable for injuries occurring on listed properties. Selling agents might even require a prelisting inspection and certification whose costs would presumably be charged to the seller. Additional services would need to be provided, including snow removal, which again would presumably be charged to the seller. This would drive commissions higher. . . And it is questionable for what gain. The property owner normally owes a duty anyway to maintain the property in a safe condition. And the property owner carries homeowners’ insurance to cover incidents such as the one alleged to have occurred here.

Based upon the above reasoning, the Iowa Supreme Court ultimately concluded as follows:

Accordingly, we hold that a listing agent who is not present and whose role is limited to granting access does not normally owe a duty of due care to persons viewing the property. (Opinion at p. 17).

In a footnote, the Court expressly noted that “[o]ur opinion does not address the situation where the listing agent is on-site showing the property.”

What are the takeaways for real estate professionals?

Despite the favorable decision in this matter, the facts of a different situation may result in a different outcome, so real estate professionals need to be aware of what they can do to help minimize the risks of being held liable for injuries of prospective buyers and their agents.

Thus real estate professionals should consult their counsel regarding specific risk mitigation actions to take, which may include the following:

Adding or strengthening the contract language regarding the seller’s indemnification duties to the listing agent within the listing agreement.
Considering the addition of express language within the listing agreement regarding control of, possession of and duties regarding the property, including the removal of ice and snow.
If you have questions regarding the outcome of this case or anything else addressed in this article, please contact Jodie McDougal at jmcdougal@fredlaw.com or 515.242.8971.

The original article is posted the on website for Fredrikson & Byron, P.A.  

 

 

Iowa Association of REALTORS

This article was written as a collaboration of IAR Staff members or invited subject matter experts.

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