ICYMI Article from MAR’s Legal Team on determining a properties legal use. Published March 20th. Check it out!
A real estate professional plays a crucial role in the due diligence process, acting as a guide for buyers or sellers in their purchase and sale of properties. The agent provides critical information about the market, current trends and values to help buyers and sellers make informed decisions as to pricing, advertising and ultimately end-use. This guidance may include resources on zoning, property type, and unit count prior to advertising the property for sale or prior to making an offer on behalf of your client.
Zoning plays a crucial role in shaping how land is used and developed in Massachusetts. Land can be zoned in a variety of ways, including residential, commercial, or special purpose for example. The zoning districts and overlay districts help to categorize the allowable uses which can be found in use tables in the municipal ordinances.
While you are not tasked with being a zoning expert, some scenarios require extra diligence.
It may seem like the zoning classification or legal use of a property is clear based on its current use, however, this may not always be the case. For example, a pre-existing non-conforming property is one that does not comply with current zoning regulations but was legally established before enactment of the current ordinances. These properties require further investigation into future allowable uses and any restrictions on modification or expansion, and may explain why a farmhouse abuts a factory!
| Have you ever gone on a listing appointment and clearly identified three apartments, both on your tour of the property and the information on the tax assessor’s property card? Did you find out during appraisal that the apartment in the attic is not actually a unit? In addition to proper determination of zoning and allowable use, defining unit count may be trickier than it seems. |
Before you market the property’s zoning district, or unit count, take the extra step and contact the city or town where the property is located and ask for a Zoning or Building Determination. It is also important to remember to recommend that your client seek legal advice for specific or unique use cases.
How does this responsibility fall to the real estate licensee?
Though not charged with being a zoning expert, real estate professionals should get comfortable with the Building and Zoning Departments in the communities they serve. While a real estate professional may reasonably rely on the representations of their seller clients and public records, taking the extra step of due diligence to explore legal use is well worth it to avoid claims of misrepresentation and protect your client’s interest.
While there is no bright line test, Massachusetts case law is instructive.
Quinlan v. Clasby: In Quinlan v. Clasby1 a Massachusetts broker advertised a property for sale as a three-family dwelling, when the home was actually configured in violation of the zoning requirements. The Plaintiffs alleged that the broker should have ascertained whether the property was lawfully zoned for use as a three-family. Here, the broker did not have knowledge of the zoning restriction and “there was little, if any reason for the broker to suspect the property was not a lawful three family.”2
The Court found that the real estate broker did all that was legally required by taking the seller’s assertion it was a three family, inspecting it to have three units, checking the deed and tax information and analyzing comparable properties.
The issue in this case centered on whether the broker should reasonably have known that the property was not a lawful three-family residence. The Court ruled that the broker was under no duty in the facts of this case to determine compliance with applicable zoning laws. Noting that if the Plaintiffs had hired an attorney when they first purchased the property, the zoning issue would presumably been identified.
Fernandes v. Rodrigue: Following a similar line of reasoning, the Court looked to Fernandes v. Rodrigue3 where a seller informed their real estate broker that their parcel was five acres. The broker checked the town records, tax bill, and the deed that indicated the size to be around 4 acres. The broker disclosed this to the buyers when in fact the parcel only contained 2.8 acres. The Court determined that “one would hardly expect the broker to have a survey made”4 and the broker’s reliance on the deed was reasonably thought to be reliable.
DeWolfe v. Hingham Centre: Contrast these cases with DeWolfe v. Hingham Centre, Ltd.5 This case makes a distinction that is worth analyzing to understand just how far a real estate broker’s due diligence extends. In highlighting the requirement to exercise reasonable care when making representations to prospective buyers, the Court makes clear that the broker cannot rely on reasonably unreliable information.
DeWolfe presented the same question as Quinlan, which is whether a broker has a duty to investigate before making representations about the zoning classification. Here, the seller told the broker that the property was zoned “Residential Business B” or “Business B” when “Residential Business B” was not a zoning designation in the municipality; the broker was not aware of any prior business use of the property and observed only houses adjoining the property. Despite information to the contrary, the broker advertised the property as being zoned “Business B.” This was at a detriment to the buyer who intended to use the property as a hair salon, an allowed use in the “Business B” district, when in fact the property was zoned “Residential B” and the buyer would be unable to use the property as intended.
Based on these facts, the Court concluded here that the broker did have a duty to exercise reasonable care in making representations as to a property’s zoning designation because the misrepresentations were based on information provided by the seller that likely should not have been reasonably relied upon.
The Court reiterates that “while a broker ordinarily may rely on information provided by the seller in making representations about a property, a broker is not insulated from all liability merely by virtue of such reliance.”6 Where it is unreasonable in the circumstances for a broker to rely on the information provided by the seller, the broker has a duty to investigate further before making any representation. This is different than Quinlan, where the broker was not liable because it was reasonable in the circumstances to rely on the information provided by the seller.
These cases make it clear that additional diligence may be necessary before advertising property use, units or zoning. As always real estate licensees are required to exercise reasonable care when making representations to prospective buyers, even if that information comes directly from the seller.
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1 Quinlin v. Clasby, 71 Mass. App. Ct. 97 (2008)
2 Id. at 103
3Fernandes v. Rodrigue, 38 Mass. App. Ct. 926 (1995)
4 Id. at 928
5 DeWolfe v. Hingham Centre, Ltd., 464 Mass. 795 (2013)
6 Id. at 800