To the responsibility of real estate brokers for the truthfulness of the information provided

Posted by: 21. 11. 2019
Update: 13/5/2024

For a long time, we have noticed a call for greater regulation and professionalization of the services of real estate brokers. This is a reaction to the often low-quality services, where real estate agents often played (and play) the role of a mere guide to the property they offer for sale, without much added value. Judgment of the Regional Court in Brno dated February 1, 2, file no. 2019 A 62/164-2017 defined what level of professionalism clients-consumers can expect from real estate brokers as service providers.

In fact, the case concerned the sale of an apartment in Brno, when the real estate agency stated in its offer that the area of the apartment was 82 m2, while it received this information from the seller and did not verify it in any way. After the sale, it became clear that the actual area was only 75 m2, so the difference was approximately 10%. For such false information, the Czech Trade Inspection fined the given real estate agency for violating the prohibition of using unfair business practices according to the statutes. § 24 paragraph 1 letter a) of Act No. 634/1992 Coll., on consumer protection, against which the real estate agency subsequently countered with an administrative lawsuit. Among other things, the real estate agency defended itself by saying that the buyer had the opportunity to check the real area of the apartment (in times of the greatest demand for real estate, apartments were sold to investors even without an inspection).

The Regional Court in Brno based its argument mainly on the wording of Act No. 634/1992 Coll., on consumer protection and Directive 2005/29/EC of the European Parliament and of the Council on unfair business practices towards consumers on the internal market. However, it is also possible to start from the ustan. § 5 of the Act No. 89/2012 Coll., Civil Code, according to which: "Whoever, publicly or in contact with another person, applies for professional performance as a member of a certain profession or status, thereby shows that he is able to act with the knowledge and care associated with his profession or status. If he acts without this professional care, it is to his detriment.” So the question is which expertise can be associated with the profession of real estate broker and which cannot. The substantive conclusion of the Regional Court in Brno reads as follows:

"In general, a real estate broker cannot be considered only as an administrator of a database of available real estate, the existence and updating of which enables the comfortable acquisition of real estate, but as a truly professional, and therefore trustworthy, partner in the acquisition of real estate (§ 2 of Act No. 634/1992 Coll., on consumer protection). The consequence of understanding the position of a real estate broker as a professional in the sense just mentioned is necessarily the assumption of trust in all the information he communicates when trading in real estate. The real estate broker is therefore responsible for the correctness of this information."

The Regional Court in Brno therefore expressed a seemingly banal definition of the scope of the professional performance of the profession of a real estate broker - to provide truthful information about the immovable property being sold.

From the decision of the Regional Court in question, the private law dimension of the case is not apparent, i.e. whether the new owner of the apartment claimed damages against the real estate agency in the form of the difference between the usual purchase price for the missing 7 m2. By estimation, the difference in the purchase price could be in the order of hundreds of thousands of crowns.

The Regional Court in České Budějovice also commented on the responsibility of the real estate agency. Here he even compared side by side the role of a lawyer and a real estate agency in the process of transferring real estate. In the case in question, the lawyer first wrote an invalid offer to use the right of pre-emption (invalidity was established due to indeterminacy). Subsequently, the real estate in question was transferred to a third party, without the participation of the lawyer, but with the participation of the real estate agency. The purchase contract was declared invalid, with the real estate agency held responsible.

From the decision of the Regional Court in České Budějovice dated 10/3/2016 No. 8 Co 2179/2015-417: "By writing a defective offer, the defendant violated her obligation arising from the provisions of § 16 of the Law on Advocacy, but, in agreement with the court of first instance, the appeals court concluded that this error of hers was not causally related to the damage claimed by the plaintiff. The decisive factor is that the violation of the pre-emption right of the other co-owners did not occur by writing an invalid offer, but by concluding the purchase contract, i.e. without the participation of the defendant, who did not participate in the actual negotiation and conclusion of the purchase contract. It is the responsibility of the real estate agency, which prepared the purchase contract as part of the services provided, that the transfer of ownership under the contract will be valid and capable of producing the intended consequences."

In the light of the above-mentioned decision of the Regional Court in Brno, we could state that the real estate agency should examine not only information from the owners of immovable property, but also previous legal proceedings connected with the immovable property.

For the sake of completeness, it can be added that the decision of the Regional Court in České Budějovice is followed by the Resolution of the Supreme Court of the Czech Republic - Senate of 30 May 5.2017, file no. No. 25 Cdo 3390/2016, which, however, is primarily devoted to the lawyer's responsibility and the causal connection with the resulting damage. On the merits, this resolution of the Supreme Court of the Czech Republic confirms the correctness of the conclusions of the Regional Court in České Budějovice.