CACI No. 4107. Duty of Disclosure by Real Estate Broker to Client

Judicial Council of California Civil Jury Instructions (2024 edition)

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4107.Duty of Disclosure by Real Estate Broker to Client

As a fiduciary, a real estate broker must disclose to the broker’s client

all material information that the broker knows or could reasonably

obtain regarding the property or relating to the transaction.

The facts that a broker must learn, and the advice and counsel required

of the broker, depend on the facts of the transaction, the knowledge and

experience of the client, the questions asked by the client, the nature of

the property, and the terms of sale. Brokers must place themselves in the

position of their clients and consider the type of information required for

the client to make a well-informed decision.

[A real estate broker cannot accept information received from another

person, such as the seller, as being true, and transmit it to the broker’s

client without either verifying the information or disclosing to the client

that the information has not been verified.]

New April 2008; Revised December 2012, June 2013, May 2020

Directions for Use

This instruction may be read after CACI No. 4101, Failure to Use Reasonable

Care - Essential Factual Elements, if a real estate broker’s duty of disclosure to the

broker’s own client is at issue. Give the second paragraph if relevant to the facts of

the case. For an instruction based on a broker’s breach of duty to the buyer with

regard to the property inspection required by Civil Code section 2079, see CACI

No. 4108, Failure of Seller’s Real Estate Broker to Conduct Reasonable

Inspection - Essential Factual Elements.

While a broker’s fiduciary duty to the client arises from the relationship and not

from contract (William L. Lyon & Associates, Inc. v. Superior Court (2012) 204

Cal.App.4th 1294, 1312 [139 Cal.Rptr.3d 670]), the scope of the duty may be

limited by contract. (See Carleton v. Tortosa (1993) 14 Cal.App.4th 745, 750−751

[17 Cal.Rptr.2d 734] [broker-client agreement may relieve broker of any duty to

provide tax advice].) Any contractual limitations may be added to the second

paragraph regarding what facts a broker must learn.

Sources and Authority

• “Under the common law, . . . a broker’s fiduciary duty to his client requires the

highest good faith and undivided service and loyalty. ‘The broker as a fiduciary

has a duty to learn the material facts that may affect the principal’s decision. He

is hired for his professional knowledge and skill; he is expected to perform the

necessary research and investigation in order to know those important matters

that will affect the principal’s decision, and he has a duty to counsel and advise

the principal regarding the propriety and ramifications of the decision. The

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agent’s duty to disclose material information to the principal includes the duty to

disclose reasonably obtainable material information. [¶] . . . [¶] The facts that a

broker must learn, and the advice and counsel required of the broker, depend on

the facts of each transaction, the knowledge and the experience of the principal,

the questions asked by the principal, and the nature of the property and the terms

of sale. The broker must place himself in the position of the principal and ask

himself the type of information required for the principal to make a well-

informed decision. This obligation requires investigation of facts not known to

the agent and disclosure of all material facts that might reasonably be

discovered.’ ” (Field v. Century 21 Klowden-Forness Realty (1998) 63

Cal.App.4th 18, 25-26 [73 Cal.Rptr.2d 784], internal citations omitted.)

• “A fiduciary must tell its principal of all information it possesses that is material

to the principal’s interests. A fiduciary’s failure to share material information

with the principal is constructive fraud, a term of art obviating actual fraudulent

intent. (Michel v. Moore & Associates, Inc. (2007) 156 Cal.App.4th 756, 762 [67

Cal.Rptr.3d 797], internal citations omitted.)

• “ ‘[W]here the seller knows of facts materially affecting the value or desirability

of the property which are known or accessible only to him and also knows that

such facts are not known to, or within the reach of the diligent attention and

observation of the buyer, the seller is under a duty to disclose them to the

buyer. . . .’ When the seller’s real estate agent or broker is also aware of such

facts, ‘he [or she] is under the same duty of disclosure.’ ” (Holmes v. Summer

(2010) 188 Cal.App.4th 1510, 1518-1519 [116 Cal.Rptr.3d 419], internal

citations omitted.)

• “ ‘A broker who is merely an innocent conduit of the seller’s fraud may be

innocent of actual fraud [citations], but in this situation the broker may be liable

for negligence on a constructive fraud theory if he or she passes on the

misstatements as true without personally investigating them.’ ” (Salahutdin v.

Valley of Cal. (1994) 24 Cal.App.4th 555, 562 [29 Cal.Rptr.2d 463].)

• “[T]he broker has a fiduciary duty to investigate the material facts of the

transaction, and he cannot accept information received from others as being true,

and transmit it to the principal, without either verifying the information or

disclosing to the principal that the information has not been verified. Because of

the fiduciary obligations of the broker, the principal has a right to rely on the

statements of the broker, and if the information is transmitted by the broker

without verification and without qualification, the broker is liable to the principal

for negligent misrepresentation.” (Salahutdin, supra, 24 Cal.App.4th at pp.

562-563.)

• “[T]he fiduciary duty owed by brokers to their own clients is substantially more

extensive than the nonfiduciary duty codified in [Civil Code] section 2079 [duty

to visually inspect and disclose material facts].” (Michel, supra, 156 Cal.App.4th

at p. 763, original italics.)

• “The statutory duties owed by sellers’ brokers under section 2079 are separate

BREACH OF FIDUCIARY DUTY CACI No. 4107

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and independent of the duties owed by brokers to their own clients who are

buyers.” (William L. Lyon & Associates, Inc. v. Superior Court (2012) 204

Cal.App.4th 1294, 1305 [139 Cal.Rptr.3d 670].)

• “[W]e are not persuaded by Defendants’ reliance on Civil Code section 2079.

Although we agree that that statute sets forth some of the duties of a real estate

broker, it is not the only source of a broker’s duties. ‘Real estate brokers are

subject to two sets of duties: those imposed by regulatory statutes, and those

arising from the general law of agency.’ Here, the [plaintiffs]’ claims are not

contingent on an expansion of the statutorily defined duties of a real estate

broker. Instead, their claim is more elementary. If a real estate broker has

information that will adversely affect the value of a property he or she is selling,

does that broker have a duty to share that information with his or her client? The

clear and uncontroversial answer to that question is yes.” (Ryan v. Real Estate of

the Pacific, Inc. (2019) 32 Cal.App.5th 637, 646 [244 Cal.Rptr.3d 129], internal

citation omitted.)

• “[Fiduciary] duties require full and complete disclosure of all material facts

respecting the property or relating to the transaction in question.” (Padgett v.

Phariss (1997) 54 Cal.App.4th 1270, 1286 [63 Cal.Rptr.2d 373].)

• “Real estate brokers are subject to two sets of duties: those imposed by

regulatory statutes, and those arising from the general law of agency.” (Coldwell

Banker Residential Brokerage Co. v. Superior Court (2004) 117 Cal.App.4th

158, 164 [11 Cal.Rptr.3d 564].)

• “[R]eal estate brokers representing buyers of residential property are licensed

professionals who owe fiduciary duties to their own clients. As such, this

fiduciary duty is not a creature of contract and, therefore, did not arise under the

buyer-broker agreement.” (William L. Lyon & Associates, Inc., supra, 204

Cal.App.4th at p. 1312, internal citations omitted.)

Secondary Sources

5 Witkin, Summary of California Law (11th ed. 2017) Torts, § 914

Greenwald & Asimow, California Practice Guide: Real Property Transactions, Ch.

2-C, Broker’s Relationship And Obligations To Principal And Third Parties, ¶ 2:164

(The Rutter Group)

California Real Property Sales Transactions (Cont.Ed.Bar 4th ed.) §§ 2.132-2.136

3 California Real Estate Law and Practice, Ch. 61, Employment and Authority of

Brokers, § 61.05, Ch. 63, Duties and Liabilities of Brokers, §§ 63.20-63.22

(Matthew Bender)

10 California Forms of Pleading and Practice, Ch. 103, Brokers, § 103.31 (Matthew

Bender)

CACI No. 4107 BREACH OF FIDUCIARY DUTY

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Page last reviewed May 2024