Release Date: 08/15/2017
QUESTION: I recently acted as a buyer's agent in a residential transaction. The buyer is now upset because she just found out that her municipality has a zoning ordinance that prohibits her from constructing a 6' tall fence around her property. The ordinance limits perimeter fences to 4' in height. Did I do anything wrong by failing to discover and disclose the existence of the local ordinance?
ANSWER: If you were aware of your client's plans to build a 6' fence, the answer may well be yes. The Real Estate Commission has published guidance in several places regarding an agent's duty to discover the existence of zoning restrictions and then disclose them to their buyer clients.
Every few years, the Commission publishes a pamphlet which includes the North Carolina Real Estate License Law and the North Carolina Real Estate Commission Rules. In the back of that pamphlet, the Commission includes its "License Law and Rules Comments". One of the topics covered in that pamphlet is the issue of material facts, and that discussion includes a discussion of negligent omissions. As the Commission notes, a negligent omission occurs when a licensee does NOT have actual knowledge of a material fact and consequently does not discover that fact, but a "reasonably prudent agent" should reasonably have known of the fact.
The Commission gives several examples of negligent omissions. One involves an agent for a buyer who purchases a commercial building that he intends to expand in the future. The Commission notes that if the buyer's agent is made aware of his client's "special needs" (i.e. the ability to legally expand the present structure), and makes no effort to investigate the local zoning laws to see if such an expansion is permissible, the buyer's agent would be guilty of a negligent omission if it turns out there is a zoning ordinance that prohibits the planned expansion.
Zoning laws, like restrictive covenants, are facts that relate directly to the property. Consequently, they are considered material facts. In update materials available on the Commission's website, the Commission has written that licensees are generally NOT expected to routinely obtain and provide copies of the applicable restrictive covenants. However, in the Commission's words: "licensees should be aware of and disclose the existence of governmental zoning ordinances which might restrict the permitted uses of the property in many circumstances.... Licensees are expected to be generally familiar with regulatory requirements which govern homes and other properties in their respective markets... Licensees should be cognizant of the questions to ask and where to go to find answers, such as the local city or county inspection office which typically issues building permits and enforces the local zoning ordinances."
The bottom line: if an agent becomes aware of a buyer's special needs, the agent should, at a minimum, be prepared to inform the buyer that land use restrictions may exist that could affect the buyer's decision to purchase the property, and then to assist the buyer in making an inquiry regarding those restrictions.
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