527 P.3d 685 (2022) (Court of Appeals of New Mexico)

The broker defendant in this matter was hired by the seller plaintiffs to list and sell their home insured by plaintiff LM Insurance. When under contract for the sale of their home, roof issues were revealed during the inspection period. The sellers could not find a roofer available to address the issues, so the broker volunteered that he would “take care of it.” The broker recommended a roofer without confirming whether he was licensed or insured. The roofer performed the work negligently resulting in a fire that destroyed the home. Sellers and LM Insurance filed a complaint for damages that included claims for breach of contract and negligence. The district court found for the plaintiffs and the matter was affirmed on appeal. The court found that New Mexico law imposed a duty of reasonable care on transaction brokers and that this duty included disclosing the licensure status for recommended contractors. The broker argued that his listing agreement was silent as to a broker’s duties about recommending contractors and that the listing agreement placed the sole responsibility of investigating and evaluating vendors on the seller plaintiffs. The court did not agree with this argument. It found that this did not limit the broker’s duty of reasonable care nor his duty to disclose the licensing of recommended contractors.

Takeaways:

• The broker in this matter was hired as a transactional agent, which is permissible under New Mexico license law. The broker had not entered into an agency relationship with the sellers. However, the court found that under New Mexico license law, the broker still owed the sellers a duty of reasonable care.
• When recommending vendors or service providers to clients or consumers, conduct due diligence to determine if they are licensed and insured.