Legal Question in Real Estate Law in California
investor/ client relationship
A real estate broker has an opportunity to acquire a rather large piece of property, but, he needs additional investors to consummate the deal. He solicits investors and discloses that if the deal is made he will be entitled to fees on future transactions regarding the sale of the property. He subsequently sells the property and takes a realtors commission on the deal.
Question: Is the broker governed by established COMMUNITY STANDARDS in his responsibility to his investors?
Or: Are his investors considered clients, and thus, is the broker governed by the STATE OF CALIFORNIA REAL ESTATE LICENSING LAW regarding fiduciary responsibility to his clients?
2 Answers from Attorneys
Re: investor/ client relationship
I see a variety of activities, each with its own set of fiduciary, professional ethical, statutory, etc. standards and duties, many of which overlap or duplicate one another, for example:
1. Soliciting investors - securities law standards.
2. Acting as a broker - DRE and fiduciary duties.
3. Acting in what appears to be a general partnership as a general partner - fiduciary duties to the other partners and to the partnership.
4. Handling investor funds - duties of a trustee.
......and so on.
If I were representing clients who thought the broker had misstepped somewhere along the way, I'd avoid (at least initially) trying to categorize his duties, and try to hold him liable on every duty and in every role - then see what sticks in court.
Re: investor/ client relationship
Attorney Whipple is correct - I am a licensed real estate broker in addition to being an attorney, and can tell you from representing other brokers in situations like this that you could have potential exposure to the investors under a wide range of legal theories. Its not as simple as saying you were this or were that - you were actually involved in multiple roles putting this together and reselling it.
To really advise you on this matter, you will need to retain an attorney to review all of the facts, and advise you as to your potential exposure. Soliciting investment, if not properly structured, is probably one of the most dangerous things a real estate broker can do.
*Due to the limitations of the LawGuru Forums, The Gibbs Law Firm, APC's (the "Firm") participation in responding to questions posted herein does not constitute legal advice, nor legal representation of the person or entity posting a question. No Attorney/Client relationship is or shall be construed to be created hereby. The information provided is general and requires that the poster obtain specific legal advice from an attorney. The poster shall not rely upon the information provided herein as legal advice nor as the basis for making any decisions of legal consequence.
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