Standard of Care

What is standard of care?
Standard of care is generally defined as the degree of care an ordinary, reasonable, and prudent person would exercise in given circumstances. Put another way, how would a similarly qualified practitioner manage the client’s care under the same or similar circumstances?

The standard of care may vary depending on the facts, as well as the skills and knowledge of your client. For example, a first time buyer would most likely require more guidance than someone who routinely invests in real estate.

Is there a standard of care in real estate?
Yes, all professions have a standard of care which is required either by law or custom. In Arizona, State statutes set forth the basic standard of care. Specifically, A.R.S. § 32-2124(E)(2) provides that:

At a minimum, an understanding of the general purpose and legal effect of any real estate practices, principles and related forms, including agency contracts, real estate contracts, deposit receipts, deeds, mortgages, deeds of trust, security agreements, bills of sale, land contracts of sale and property management, and of any other areas that the commissioner deems necessary and proper.

The Arizona Department of Real Estate’s Commissioner’s Rules provide further guidance. The rules discuss fiduciary duty, disclosure with regard to the agent’s knowledge about the condition of the property or interest in the property, and compensation, amongst other requirements. See A.A.C. R4-28-1101.

Who determines if the standard of care is met?
Whether the standard of care was met is typically brought into question by a client or customer. More specifically, unhappy clients or customers may complain about the services that were provided or believe that you failed to perform a duty owed to them.

If a lawsuit ensues, one of your peers, typically a broker, may opine as to whether you met or fell below the standard of care. Generally, this occurs when the broker furnishes an expert opinion on how you handled the transaction. Based on the facts presented and the broker’s expert testimony, a jury of your peers may then determine whether you met the standard of care.

What happens when the standard of care is not met?
A claim for wrongdoing will usually appear as a negligence claim. In order to find negligence, a jury must determine the following: (1) Did you owe a duty?; (2) Was there a breach of that duty?; (3) Did the breach of duty cause injury?; and (4) Was there any damage?

If you are found to owe a duty and do not meet the standard of care, you could be held legally liable and have to pay damages to the client or customer.

Best practice . . . Stay Informed!
The best way to ensure you do not fall below the standard of care is to be educated and stay educated. Attend classes and trainings, read the statutes and rules, and, if you don’t know, ask your broker!

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