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Code of Ethics Case Studies

Case #2-4: Obligation to Ascertain Pertinent Facts

(Revised Case #9-10, May 1988. Transferred to Article 2, November 1994)

Shortly after REALTOR® A, the listing broker, closed the sale of a home to Buyer B, a complaint was received by the Board charging REALTOR® A with an alleged violation of Article 2 in that he failed to disclose a substantial fact concerning the property. The charge indicated that the house was not connected to the city sanitary sewage system, but rather had a septic tank.

In a statement to the Board's Grievance Committee, Buyer B stated that the subject was not discussed during his various conversations with REALTOR® A about the house. However, he pointed out that his own independent inquiries had revealed that the street on which the house was located was "sewered" and he naturally assumed the house was connected. He had since determined that every other house on the street for several blocks in both directions was connected. He stated that REALTOR® A, in not having disclosed this exceptional situation, had failed to disclose a pertinent fact.

REALTOR® A's defense in a hearing before a Hearing Panel of the Professional Standards Committee was:

  1. That he did not know this particular house was not connected with the sewer;
  2. That in advertising the house, he had not represented it was being connected;
  3. That at no time, as Buyer B conceded, had he orally stated that the house was connected;
  4. That it was common knowledge that most, if not all, of the houses in the area were connected to the sewer; and
  5. That the seller, in response to REALTOR® A's questions at the time the listing was entered into, had stated that the house was connected to the sewer.

What do you think the hearing panel concluded? Show Answer