It all started with a simple question to VAR legal guru Lem Marshall concerning a proposed major change to our county zoning ordinance. Without getting into all the details of the zoning change, suffice it to say this is a major ch

a

nge for our county from a fairly simple two acre minimum building lot to the sliding scale as shown.

STANDARD SUBDIVISIONS
Parcel Acreage # Lots
4 -10acres = 2 lots 140.01 – 180 = 10 lots
10.01 – 20 = 3 lots 180.01 – 220 = 11 lots
20.01 – 30 = 4 lots 220.01 – 260 = 12 lots
30.01 – 40 = 5 lots 260.01 – 320 = 13 lots
40.01 – 60 = 6 lots 320.01 – 380 = 14 lots
60.01 – 80 = 7 lots 380.01 – 440 = 15lots
80.01 – 100 = 8 lots 440.01 – 500 = 16lots
100.01 – 140 = 9 lots 500.01=16 lots+ 1/100 acres

Lem: Our county is about to pass this new sliding scale zoning: http://www.co.rockbridge.va.us/pubhearings/JPH080501.pdf. We need to know our obligations as REALTORS® for disclosure – how they are different – what about existing listings – what about under contract properties …

Lem’s quick response:

I don’t see that it’s the listing agent’s job to do the buyer’s due diligence as to zoning or the suitability of the land for buyer’s purposes.

The agent of the buyer buying development property, on the other hand, should be up to speed on this kind of change, and bring it to the attention of the buyer client. But even then the contract (if one has been entered into) should speak to buyer’s obtaining certain assurances as to zoning and planning approval, and if the buyer has not already reserved that due diligence right, he’s in trouble even before this change.

Like all land-use issues, the commercial broker needs to be able to guide buyers in the basics of due diligence (assuming the buyer is not represented by competent real estate counsel) and to suggest the appropriate provisions be included in the offer. Otherwise, I don’t see the need for any special disclosures, especially by the listing agent.

I’m relieved to check this off my “to do list” and report back to our Association Board of Directors Lem’s note along with my thoughts “…seems to follow along with the “Buyer Beware.”

But not so fast, we have member questions & further concerns. The following are excerpts from a string of emails that I found to be a very interesting lesson on Agency.

Member concerns & questions:

We need to get our membership educated on the new law and how it will affect our business practices. We need to be sure that we do not expose ourselves to an liability for passing along incorrect information to sellers or buyers.

Lem, I’m very concerned about liability for our agents on either side of any transaction and believe that disclosure backed up by documentation is need for this to work.

Lem’s Response:

Pursuant to what requirement do sellers and listing agents have to inform buyers about zoning issues? There has never been such a requirement, and the latest changes to the Code of Virginia make specifically clear that land use issues are beyond the disclosure obligations of listing agents. See Section 54.1-2131.

This is the buyer’s responsibility. Any buyer who buys land to build on should not expect seller or the seller’s agent to determine and inform buyer about how many lots can be carved out of the land purchased. This is the buyer’s responsibility, and the buyer’s alone. (Buyer agents might have some responsibility to alert buyers to the need to check, but even our buyer agents are not expected to be zoning experts.) This information is available from the locality, and if the buyer wants it, that’s where he gets it. He and the buyer agent can determine the role the buyer agent is expected to play, but to my mind, the proper role is not to play zoning expert, but to remind the buyer (if he needs reminding) that the buyer needs to do due diligence about the suitability of the property for the buyer’s purposes.

I would even go further. Listing agents who take it upon themselves to make representations about zoning may do so, but they do so at their considerable risk. If they’re going to render zoning opinions to the buyer, they had better be right. Why would they take on this responsibility?

Further member concerns:

Actually, I’m relieved to know that there is no requirement that listing agents reveal in advertising or mls listings the maximum number of building rights a parcel may have by law and that buyer agents may direct their clients to do their own due diligence in that regard.

I don’t see this as a zoning issue. When a seller, for instance, wants to sell off a portion of his property he will have to clearly state how many building rights are going to convey with it… When it comes to advising a seller client about a suggested listing price or a buyer client on an appropriate offer amount, shouldn’t agents consider this type of information? Should we direct our clients to produce this information for us before we can provide such advice?

Isn’t this information a material fact about a property just like some uncommon easements (mineral rights) or covenants (conservation easements)? If not, please help me to understand why it isn’t. I know a number of experienced agents who see this just as I do.

Is it possible that we practice the profession locally a bit differently than some in other parts of Virginia?

Lem’s response

I think I understand what you’re saying about the importance of the zoning/building lot issue, but where I think we’re getting crossed up is in determining whose responsibility it is to protect the buyer here. Certainly listing agents need to be able to counsel sellers about their affairs in this regard, and buyer agents need to be able to help buyers. But the original inquiry was as to whether listing agents have a duty to buyers to disclose how many houses can be built on a particular piece of land being sold. Ultimately, this is a land-use and zoning issue, because the number of units that can be built on a particular lot is a function of the zoning ordinance you are dealing with. (Building density is always a zoning issue.) I don’t know how else to say it except that sellers of real estate and their agents have no duty to make determinations and then representations to buyers about land-use issues.

Section 54.1-2131 B of the Code of Virginia provides: “A licensee engaged by a seller shall disclose to prospective buyers all material adverse facts pertaining to the physical condition of the property which are actually known by the licensee. As used in this section, the term ‘physical condition of the property’ shall refer to the physical condition of the land and any improvements thereon, and shall not refer to: … (ii) matters relating to governmental land use regulations ….”

I think this is the main confusion. What you say about the advice agents are expected to give their clients is true, but you shouldn’t take it further to impose on listing agents an obligation to do land-use due diligence for buyers. If it’s in the seller’s interest for the listing agent to be involved in the buyer’s affairs, so be it. But the legal duty just isn’t there, other than as necessary to achieve the seller’s objectives. And as I said earlier, there’s substantial risk in making zoning and other land-use representations to anybody.

A member’s conclusion:

It isn’t the listing agent’s responsibility to disclose to a prospective buyer how many building rights a listed property may have just as it isn’t the buyer agent’s responsibility to do the same for his client. If needed, they should both refer their clients to the appropriate authorities or professionals for accurate information.

As agents we all strive to serve our clients to the best of our abilities. The member questions were all good questions, coming from a seasoned agent that works hard for their clients. They take the time to get to know the clients requirements and use for the property, they take their responsibility and duties to their client seriously. This exchange illustrates just how easy it is to overstep our agency obligations; not only exposing ourselves to unnecessary liability but also actually not representing our clients best interest.

Moral of the story : Be the source of the source not the source.

Note: Bold and italics added by Candy Lynn for emphasis.