Real Estate Agent Liability in Texas -- More Agents Means More Potential for Malpractice and Liability

Like most other industries, Real Estate in Texas is down. However, it is almost universally agreed that our real estate markets are healthier than those of most other states. In fact, a recent survey by Forbes of the 40 largest U.S. metropolitan areas to determine the best cities for purchasing a home, placed four Texas cities in the top six spots. Houston and Austin ranked first and second, while Dallas and San Antonio placed fifth and sixth.

With the "hot" market that Texas has enjoyed for years, the number of licensed agents has burgeoned. Following the real estate bust of the late 1980's and the aftershocks felt through most of the 90's, the number of active Texas real estate licensees dropped nearly in half from 1986 to 1997. Then came the extended real estate boom, which has only recently began to subside. Since 1997, the number of Texas real estate licensees has been growing. Today, there are an estimated 140,000 Texas licensees.

Unfortunately, not all Texas real estate agents (or practitioners of any industry for that matter) are ethical or competent. As with any commission-based business, there exists an inherent pressure on real estate agents to close sales of real property -- even when those sales benefit only the agent. Also, because of their close proximity to transactions and access to sensitive information, some real estate agents are tempted to engage in self-dealing. Finally, agents are human, and they sometimes make innocent mistakes. Even in those situations -- where rel estate agent negligence or incompetence (as opposed to malfeasance) results in harm, loss or injury to the agent's client or to the other party in a real estate transaction can be actionable.

The Texas Real Estate License Act, located at Chapter 1101 of the Texas Occupations Code, governs the issuance of real estate licenses in Texas, and prescribes standards for the conduct of Texas real estate brokers and agents. Two sections, in particular, apply to most situations by which people are injured by the acts or omissions of real estate professionals. They are as follows:

Sec. 1101.803. GENERAL LIABILITY OF BROKER. A licensed broker is liable to the commission, the public, and the broker's clients for any conduct engaged in under this chapter by the broker or by a salesperson associated with or acting for the broker.

Section 1101.803 is generally understood to create strict liability of a broker for thr the acts or omissions of real estate agents (salepersons) associated with the broker. This is significant because in many situations, the real estate client (buyer or seller) develops a relationship solely with a salesperson. Indeed, in many instances, the client never meets or speaks with broker, and has all contact with the real estate firm through the salesperson. Notwithstanding this fact, or the fact that he or she may be a total stranger to the client, the broker is liable to the client for any errors, misdeeds or failures of the salesperson. The practical significance of Section 1101.803 is that it provides an aggrieved party the right to pursue and potentially recover from both the guilty agent, and his or her broker. In some instances, the agent and broker may even have separate errors and omissions/professional liability insurance policies under which recovery may be sought. It is extremely important that an individual claiming professional negligence resulting from a real estate agent's acts also makes a timely claim against the broker. Even some experienced lawyers are unaware of this provision, and resultantly, many legitimate claims against brokers have never been pursued.

The second oft-implicated section of the Texas Real Estate License Act is Section 1101.805 relating to representations (or the lack thereof) made by agents and their clients. It provides:

Sec. 1101.805. LIABILITY FOR MISREPRESENTATION OR CONCEALMENT. (a) In this section, "party" has the meaning assigned by Section 1101.551.

(b) This section prevails over any other law, including common law.

(c) This section does not diminish a broker's responsibility for the acts or omissions of a salesperson associated with or acting for the broker.

(d) A party is not liable for a misrepresentation or a concealment of a material fact made by a license holder in a real estate transaction unless the party:

(1) knew of the falsity of the misrepresentation or concealment; and

(2) failed to disclose the party's knowledge of the falsity of the misrepresentation or concealment.

(e) A license holder is not liable for a misrepresentation or a concealment of a material fact made by a party to a real estate transaction unless the license holder:

(1) knew of the falsity of the misrepresentation or concealment; and

(2) failed to disclose the license holder's knowledge of the falsity of the misrepresentation or concealment.

(f) A party or a license holder is not liable for a misrepresentation or a concealment of a material fact made by a subagent in a real estate transaction unless the party or license holder:

(1) knew of the falsity of the misrepresentation or concealment; and

(2) failed to disclose the party's or license holder's knowledge of the falsity of the misrepresentation or concealment.

In plain English, Section 1101.805 stands for a pretty simple proposition: real estate professionals are not responsible for misstatements or failures in disclosure of their clients unless the professional is aware of the misstaement/concealment and doies nothing about it. The proposition applies in reverse too -- innocent clients are not liable for misstatements or failures in disclosure of their agents.


Horror stories about real estate agents abound -- and not just in Texas. If you have been aggrieved by a Texas real estate broker or agent, you should consult with experienced legal counsel familiar with the standards and duties of Texas real estate professionals, and the complexities of real estate transactions. Trey Wilson was named by Scene in SA Magaizine as one of San Antonio's Best Real Estate Litigation Attorneys. In addition to being a real estate and construction lawyer, Trey Wilson is a licensed real estate agent. He may be reached at 210-223-4100 or www.sa-law.com