A New York real estate salesperson is involved in a transaction where the seller explicitly instructs them not to disclose a known, non-material defect in the property (e.g., a small crack in the garage floor that does not affect structural integrity). What is the salesperson's ethical obligation in this situation?
- AThe salesperson must obey the seller's instruction, as the defect is non-material and not legally required to be disclosed.
- BThe salesperson must disclose the defect, as all known defects, regardless of materiality, should be revealed.
- CThe salesperson must terminate the agency relationship if the seller refuses to disclose any known defect.
- DThe salesperson should advise the seller that while it's non-material, it's best practice to disclose, but ultimately follow the seller's lawful instruction.
Show answer & explanationAnswer & explanation
Correct answer: D. The salesperson should advise the seller that while it's non-material, it's best practice to disclose, but ultimately follow the seller's lawful instruction.
While it is always best practice to disclose all known defects, New York law generally requires disclosure of 'material' defects. If a defect is truly non-material and the seller instructs non-disclosure, the agent's duty of obedience to a lawful instruction applies. However, the agent should advise the client on best practices.
Why the other options are wrong
- A. This option is too absolute; while obedience is a duty, advising best practice is also part of an agent's role.
- B. Only 'material' defects are legally mandated for disclosure in NY, though full disclosure is always recommended.
- C. Terminating the relationship is an extreme measure not typically required for a non-material defect when the seller gives a lawful instruction.
Disclosure of Non-Material Defects (NY)
In New York, while material defects must be disclosed, licensees generally follow a seller's lawful instruction regarding non-material defects after advising on best practices, balancing the duty of obedience with ethical considerations.
- Material defects require disclosure.
- Non-material defects: duty of obedience applies to lawful instructions.
- Agent should still advise on best practice of disclosing all known defects.
Memory trick: For small flaws, obey if lawful, but 'Suggest the Truth, then Stand by Your Client'.