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					II. NEVADA LAW ON FIDUCIARY DUTIES
                                                TA b L E O F C O N T E N T S


A.   Evolution of thE Common lAw to StAtutory DutiES ......................................................................3

B.   CliEnt BEforE SElf - ABSolutE fiDElity ........................................................................................................5
     1. Disclosure of licensee’s interest ......................................................................................................5
        a. Interest in the Transaction ............................................................................................................5
        b. Interest in the Property .................................................................................................................6
     2. Disclosure in writing .........................................................................................................................7
     3. Confidentiality .....................................................................................................................................7

C.   Duty of honESty .........................................................................................................................................................9
     1. no Deceit, fraud or Dishonesty .......................................................................................................9
     2. Silence as Deceit ................................................................................................................................10

D.   rEASonABlE Skill AnD CArE: CompEtEnCy ...............................................................................................11
     1. Standard of Care ................................................................................................................................11
     2. negligence ..........................................................................................................................................11

E.   DiSCloSurE: “ShoulD hAvE known” — Duty to invEStigAtE ......................................................13
     1. Source .................................................................................................................................................13
     2. relating to the property ...................................................................................................................13
        a. When Must a Licensee Investigate ...........................................................................................13
        b. What Must be Investigated .......................................................................................................14
        c. Exemptions ..................................................................................................................................15
        d. Representations of the Client ................................................................................................... 15
     3. Concerning the transaction.............................................................................................................15
     4. level of investigation .......................................................................................................................16

f.   SupplEmEntAry SErviCES ......................................................................................................................................17
     1. Beyond the licensee’s Expertise.....................................................................................................17
     2. Beyond the licensee’s Authority ...................................................................................................17

g.   rEviEw ..............................................................................................................................................................................20
1. NRS 1.030.


2. NRS 645.251.




                             The laws and regulations that govern the licensee and the real estate transaction
                             come from various sources. The main three sources are statute, regulation, and
                             common law. Besides state law, the licensee is governed by applicable federal
                             statutes and regulations. The focus here is on state law and regulation as they are
                             modified by applicable case law.




                                   A. EVOLUTION OF THE
                              COMMON LAW TO STATUTORY DUTIES
Federal statutes are found
in the United States
Code (U.S.C.). Federal
regulations are in the       The common law has its origins in             put into statute and for these duties (NRS
Code of Federal              previous judicial decisions. The United       645.252, 645.253, and NRS 645.254) the
Regulations (C.F.R.).        States derives its common law from            common law was expressly rejected.2
                             England. When deciding a case, a              Even so, judicial decisions and traditional
Common, or case law, is      judge looks at how similar cases were         common law terms direct how statutes or
law identified through       previously decided. This helps the            regulations are interpreted.
judicial decisions in
lawsuit cases.
                             judge and the legal system to maintain
                             consistency.                                  Common law terms: The rules of
                                                                           agency evolved from the common law.
                             Over the years a body of law was              Agency law defines the duties and
                             complied from these cases addressing          responsibilities a real estate licensee has
                             common topics such as contracts, agency,      to the client. However, the legislators,
                             and real property. Nevada has adopted         when writing the statutes, often used
                             this English common law. 1 It covers any      traditional common law terms but did not
                             legal issue not addressed by statute or       define them. Without an understanding
                             regulation. Statutes or regulations control   of what those common law terms mean,
                             unless otherwise stated. In 1995, many of     the licensee will not know what must
                             the licensee's common law duties were         be done or avoided. For example, a
                               II - 3
licensee must have absolute fidelity to the                                           3. lemon v. landers, 81
client’s interest. (NAC 645.605(6)) What is                                           Nev. 329, 332 , 462 P.2d
                                                                                      648 (1965).
absolute fidelity? The licensee must look
at case law to understand the parameters                                              4. lowe v. State Dep’t
of absolute fidelity.                                                                 of Commerce, 89 Nev.
                                                                                      488, 494, 515 P. 2d 388
                                                                                      (1973), see also Jory v.
Common law Agency: Under common                                                       Bennight, 91 Nev. 763,
law, a broker’s main duty is to ensure the                                            542 P.2d 1400, 1404,
client’s business and interests are carried                                           (1975).
out to the client’s best advantage.3 This is
the broker’s fiduciary duty. It includes:

1. Absolute fidelity to the client’s
   interests;

2. Honesty;

3. The broker’s use of reasonable
   skill and care in all aspects of the
   transaction, and

4. Full disclosure of all issues and
   facts concerning the property or the
   transaction.4




                                NEVADA LAW ON FIDUCIARY DUTIES TO THE CLIENT II - 4
5. NAC 645.605 (6).


6. lemon v. landers, 81
Nev. 329, 332, 462 P.2d
648 (1965).                              b. CLIENT bEFORE SELF–
                                            AbSOLUTE FIDELITY
7 & 8. holland realty v.
nv real Estate Comm.,
84 Nev. 91, 98, 436 P.2d
422 (1968).


9. NRS 645.252 (1)(b)      A licensee has the duty of absolute fidelity       [a] broker when pursuing his own
& (c); NRS 645.633 (1)     to the client’s interests.5 Absolute fidelity      interest cannot ignore those of his
(g); NAC 645.605 (4);      means a licensee must put the client’s             principal and will not be permitted
NAC 645.610 (1)(b)(1-2);   interests ahead of the licensee’s interest.        to enjoy the fruits of an advantage
NAC 645.637 and NAC        A licensee “will not be permitted to               taken of a fiduciary relationship,
645.640.                   pervert his authority to his own personal          whose dominant characteristic is
                           gain in severe hostility to the interest of        the confidence reposed by one in
10. NRS 645.280.           his principal.”6                                   another.’8

                           For example, absolute fidelity is breached      There are two prongs to the duty of
                           when a licensee withholds an offer              absolute fidelity. First, the duty to disclose
                           from the client in order to purchase the        the licensee’s interest and, secondly, the
                           property himself. In Holland Realty v.          prohibition against taking advantage of
                           Nevada Real Estate Commission (1968)7           any situation, even if disclosed, that would
                           Grant Holland, a Las Vegas broker, sued         harm the client’s interests.
                           the Real Estate Division when it revoked
                           his license. The Real Estate Commission         1. DISCLOSURE OF LICENSEE’S
                           had found him guilty of violating NRS              INTEREST
                           645 for misrepresentation, making false
                           promises to induce performance, and             A licensee must disclose in writing to
                           receiving a secret and undisclosed profit.      the parties whenever the licensee has a
                                                                           personal interest in either the transaction
                           Holland had double escrowed a property          or the property. Such disclosure ensures
                           without disclosure to either party and          everyone is aware of the licensee’s
                           kept the profit. In that transaction, he        potential conflicting loyalties.9
                           misrepresented who was taking title, his
                           agency status, and who were the real            The licensee should be aware that some
                           parties. He then sold the property a third      laws prohibit certain acts even if the
                           time as an undisclosed buyer’s agent            licensee’s interest is disclosed. As an
                           while acting as the seller’s agent under a      example, a salesperson may not receive
                           net listing agreement. He did not disclose      compensation from anyone other than
                           to the seller the property’s true sale price.   his or her broker: taking such payment is
                           Again, he kept the difference.                  illegal whether or not it is disclosed.10

                           After the Commission revoked his license,       a. interest in the transaction – Any
                           Holland sued the Division. The court            time the licensee has an interest in the
                           upheld the Division’s discipline and            transaction, that interest must be disclosed
                           found Holland’s behavior breached his           in writing. An “interest in the transaction”
                           basic fiduciary duty of absolute fidelity to    occurs when:
                           his clients. The court stated:

                           II - 5
1. The licensee receives, or expects to           relationship with a principal: The              11. NAC 645.605 (4)(e).
   receive, compensation from more than           licensee must disclose whenever he or
                                                                                                  12. NRS 645.252 (1)(b).
   one party;11                                   she has a personal relationship with a
                                                  principal to the transaction.18 A licensee      13. NAC 645.605 (4).
2. Is a party in the transaction, or              (including permitted property managers)
                                                                                                  14. Judy bendure,
                                                  must disclose the licensee’s affiliation
                                                                                                  “Preferred Vendor
3. Has a personal relationship with one of        with, or financial interest in, any person or   Lists,” Real Estate
   the principals.                                entity that furnishes maintenance or other      Division Open House,
                                                  services related to the property.19             vol. 25, issue 1, Winter
                                                                                                  2000, at p. 4. The Open
Compensation: The licensee is under an                                                            House is the Real Estate
affirmative duty to disclose to each party        rESpA: RESPA (Real Estate Settlement            Division’s information
to the real estate transaction each “source”      Procedures Act) prohibits referrals from        bulletin.
from which the licensee will receive              one business to another business when
                                                                                                  15. NRS 645.633 (1)(g).
compensation.12 The statute does not              owned by the same company unless there
require the licensee to disclose the amount       is full disclosure. These are affiliated        16. NRS 645.252 (1)(c);
of the compensation, only its source - the        business arrangements.20 If a licensee has      NAC 645.637.

identity of the person or company giving          an ownership interest in a business and         17 & 18. NAC 645.640
the compensation.13                               refers clients to that business, the licensee   (1).
                                                  must disclose that ownership interest.
                                                                                                  19. NAC 645.605 (4)(b).
Compensation includes referral fees and
other payment such as fees received from          b. interest in the property – A licensee,       20. 12 U.S.C. § 2607.
vendors to be on a broker’s list of service       whether acting as an agent or a principal,
                                                                                                  21. NRS 645.252 (1)(c)
providers. Even though the broker may             has an “interest in the property” whenever
                                                                                                  and NAC 645.640.
give a service provider list to a client          the licensee has, or anticipates, an
without charge, the broker must disclose          ownership interest.21 Failure to disclose       22. NAC 645.605 (4).
if a vendor paid to be on that list.14            the licensee’s interest is an element in the
                                                                                                  23. Alley v. nv real
                                                  Real Estate Commission’s determination          Estate Div., 94 Nev. 123,
Compensation includes money the broker            of whether the licensee was deceitful or        125, 575 P.2d 1334 (1978).
may accept, give or charge as a rebate or         dishonest.22
                                                                                                  24. tahoe village realty
direct profit on expenditures made for the
                                                                                                  v. DeSmit, 95 Nev. 131,
client.15 For example, a buyer asked the          Any anticipated interest must be disclosed      134, 590 P.2d 1158 (1979).
broker to have a new air conditioning unit        even if it is only a pass-through interest.
installed. The buyer paid for the unit in         For example, a licensee must disclose
escrow. The air conditioning manufacturer         when the licensee takes title, however
offered a $200 rebate. The broker, when           briefly, during a “double escrow.”23
he purchased the unit, applied for and            Engaging in an undisclosed double
kept the rebate without disclosing it to his      escrow transaction is a breach of the
buyer. This is a violation of the broker’s        licensee’s absolute fidelity to the client.     The Real Estate Settlement
absolute fidelity to the client.                  The Nevada Supreme Court has found it           Procedures Act (RESPA),
                                                                                                  federal law, prohibits a
                                                  illegal when,                                   licensee from receiving
party to the transaction: When a licensee                                                         or giving kickbacks and
is acting as a principal, it is a material fact      [t]he broker or salesman purchases           unearned fees even if
                                                                                                  such kickbacks or fees are
and must be disclosed.16 This ensures all            a principal’s property in the first          disclosed. (RESPA, 12
parties to the transaction are fully aware           escrow, and sells it to a third party        U.S.C. § 2607).
of where the licensee’s loyalties may lie.           at a profit in a second escrow
                                                                                                  The relationships that must be
Moreover, the licensee may not acquire               without a full disclosure to both
                                                                                                  disclosed are when a principal
(purchase), lease or dispose of (sell),              the principal and the third party.           is a member of the licensee’s
any time-share or real property without              The broker or salesman receives a            immediate family, or a member
revealing the licensee’s licensed status.17          commission on the sale in the first          of the licensee’s firm, or an
                                                                                                  entity (such as a corporation)
                                                     escrow and a secret profit on the            in which the licensee has an
                                                     closing in the second escrow. 24             ownership interest.

                                 NEVADA LAW ON FIDUCIARY DUTIES TO THE CLIENT II - 6
25. lemon v. landers,      A licensee may not take an undisclosed          3. CONFIDENTIALITY
81 Nev. 329, 332, 462      profit at the expense of another party,
P.2d 648 (1965).
                           nor may the licensee purchase or sell the       A licensee may obtain confidential
26. NAC 645.637.           property of a client through the use of a       information during the course of the
                           third person without full disclosure and        brokerage relationship when the
27. NAC 645.640 (1).
                           the client’s consent.25                         licensee is told, or inadvertently
28. American fidelity                                                      discovers, information harmful to the
fire ins. v. Adams, 97     2. DISCLOSURE IN WRITING                        client’s interests.
Nev. 106, 108, 635 P.2d
88 (1981).
                           Whether the licensee’s interest is in           What constitutes a client’s confidential
29. NAC 645.640 (2).       the transaction or in the property, the         information varies from transaction to
                           disclosure must be in writing - an              transaction and from client to client.
30. NAC 645.610 (1)(b)
(1-2).                     oral disclosure does not satisfy the            The Real Estate Division has previously
                           regulations.26 When disclosing the              identified confidential information as “the
31. Real Estate Division   licensee’s interest in the property, the        client’s motivation to purchase, trade or
form, Consent to Act,
                           disclosure must state the licensee is           sell, which if disclosed, could harm one
05/01/05..
                           acquiring or selling the property for him       party's bargaining position or benefit
32. NRS 645.254 (2).       or herself and that the licensee is a broker,   the other.”31 It includes any information
                           broker-salesperson, or salesperson. The         that a reasonable person would expect,
33. NRS 645.252 (1)(a).
                           Real Estate Division will recognize the         or request, to be kept confidential. The
34. holland realty v.      disclosure if the licensee includes the         licensee should consider confidential any
nv real Estate Comm.,      term “agent,” “licensee,” or “broker,           information that, if disclosed to the other
84 Nev. 91, 98, 436 P.2d
422 (1968).                broker-salesperson, salesperson,”               party, would harm the client’s position.
                           whichever designation is appropriate.27         A licensee is under the duty not to disclose
35. NRS 40.770.                                                            the client’s confidential information
                           timing: The disclosure must be made             for one year after the revocation or
                           “as soon as practicable,” but not later than    termination of the brokerage agreement.32
                           the date and time on which any written
                           document is signed by the parties. The          Disclosure Duty: At no time does
                           Nevada Supreme Court has defined                a client’s request for confidentiality
                           “as soon as practicable” to mean                control the licensee’s disclosure duty. A
                           “promptly” or “within a reasonable              licensee must disclose to all parties any
                           length of time” considering the facts and       material and relevant facts relating to the
                           circumstances of each particular case.28        property.33 This affirmative duty overrides
                                                                           a client’s request that the licensee not
                           Advertising: If the licensee advertises         disclose relevant property facts such
                           a property, the advertisement must              as defects. What facts are material and
                           identify the licensee’s licensed status.        relevant? Any fact about the property that
                           This disclosure must be made whether            is likely to influence a principal about the
                           the licensee is acting as an agent or as        property’s desirability.34
A defect is “a condition   a principal.29 Accordingly, the licensee
that materially affects    must state “for sale by owner-broker”           Confidential material facts: by law,
the value or use of
property in an adverse
                           (agent, salesperson, etc.)30 or substantially   certain facts that a party may consider
manner.” NRS               similar words in any advertisement for          material, are deemed not material. Since
113.100(1).                the property in which the licensee is a         the law says those facts are not material,
                           principal.                                      the seller and licensee may consider them
                                                                           confidential. The licensee is not liable for
                                                                           their non-disclosure.35




                            II - 7
In Nevada, it is not material if the            required Disclosure: When may a               36. NRS 645.254 (2).
property was the site of a homicide,            licensee disclose confidential information?
suicide or death. The exception is if the       The law provides protection for disclosure    37. NRS 645.253.
property caused the death, for example,         of confidential information under any
someone was electrocuted by the home’s          one of four circumstances: first, when a
bad wiring.                                     court of competent jurisdiction orders
                                                disclosure; second, when the client
It is not material if the property was          authorizes disclosure;36 third, when
occupied by a person with AIDS or any           the licensee discloses information to
other disease not transmitted through           the broker;37 and fourth, when the
occupancy of the property.                      information is required to be disclosed by
                                                law. The courts will not allow the licensee
With one exception, it is not material if       to hide behind a client’s instruction to
the property was the site of a felony. The      keep information confidential that the
exception is if the property was used to        licensee is obligated by law to disclose.
manufacture methamphetamine and the
property was not rehabilitated.                 The right of confidentiality is held by
                                                the client, not the licensee. That means
It is not material if the property is located   it is the client’s decision on whether        AIDS stands for acquired
near a licensed facility under NRS              confidential information may be disclosed.    immune deficiency
                                                                                              syndrome, a deadly disease
449.0055, transitional living for released      If there is any question whether a fact       caused by infection and
offenders. (This does not include a             or information is confidential, the           transmitted through blood or
halfway house for recovering alcohol and        licensee must clear it with the client        bodily secretions.
drug abusers.)                                  before disclosure.
                                                                                              Methamphetamine (meth)
                                                                                              is an illegal street drug.
Finally, by law it is not material if a sex                                                   During the making of meth
offender lives, or is expected to live, in                                                    toxic fumes seep into the
                                                                                              walls, floors, sinks and
the community. This information does not                                                      counters. General cleaning
need to be disclosed unless the broker and                                                    or painting does not remove
a buyer have agreed otherwise.                                                                the residue. The property
                                                                                              must be “rehabilitated”
                                                                                              (made habitable again). Only
The licensee may not be held liable to the                                                    the government (for example,
other party for non-disclosure of any of                                                      a health department) or a
the above items. However, a buyer-client                                                      certified entity can legally
                                                                                              rehabilitate a meth property
and licensee may agree the licensee will                                                      NRS 40.770(6).
disclose the information if the licensee
knows the answer. Any such agreement                                                          NRS 179D.400 defines a
                                                                                              “Sex Offender” as a person
should be in writing and cleared with the                                                     who is: (a) Convicted of
broker.                                                                                       a sexual offense listed in
                                                                                              NRS 179D.410; or (b)
                                                                                              Found guilty by a court of a
no misinformation: A licensee is not
                                                                                              sexual offense, such as: (1)
allowed to lie or give misinformation.                                                        A sexually violent predator,
If asked a direct question regarding a                                                        or (2) A nonresident sex
confidential matter, the licensee should                                                      offender who is a student or
                                                                                              worker within this state.
state the information is confidential and
refuse to answer. The client may authorize                                                    NRS 209.081 “Offender”
the licensee to direct the individual to a                                                    means any person
                                                                                              convicted of a crime under
reliable source.                                                                              the laws of this state and
                                                                                              sentenced to imprisonment
                                                                                              in the state prison.



                                NEVADA LAW ON FIDUCIARY DUTIES TO THE CLIENT II - 8
38. NRS 645.3205.

39. NRS 645.633 (1).
                                               C. DUTY OF HONESTY
40. holland realty v.
nv real Estate Comm.,
84 Nev. 91, 98, 436 P.2d
422 (1968).

41. NRS 645.630 (1)(a)
& (b).                       1. NO DECEIT, FRAUD OR
                                DISHONESTY
42. NRS 645.633 (1)(e).
                             Whether acting as a principal or an agent,      Dishonest Activities: Activities
43. NRS 645.635 (10).
                             a licensee has a duty to all parties not to     that constitute deceitful, fraudulent
44. NAC 645.525.             be deceitful, fraudulent or dishonest.38        or dishonest behavior include, but
                             Deceit is the act of intentionally or           are not limited to, any material
45. NRS 645.993.
                             recklessly giving a false impression or         misrepresentation or false promises of
46. NRS 645.645.             statement, so that another person will rely     a character likely to influence, persuade
                             on it. It includes any conviction involving     or induce the listener’s reliance on
47. NAC 645.650.
                             bad faith, dishonesty, a lack of integrity,     the misrepresentation;41 guaranteeing
48. Letter to Licensees,     or moral turpitude.39 Dishonesty is the         future profits on the resale of property;42
from Gail Anderson,          act of not telling the truth. In other words,   submitting any false or fraudulent
Real Estate Division
                             the licensee must at all times be honest.       appraisal to a financial institution or
Administrator,
“Disclosure of fees and      Webster’s defines honesty as “adherence         other interested person;43 naming false
what they are labeled”.      to the facts.”                                  consideration in a document;44 filing with
December, 2002, as                                                           the Division any false documents with
a violation of NRS
645.3205.                    licensee’s personal Affairs: The duty           willful, material misstatements of fact,45
                             of honesty extends past the licensee’s          and misrepresentation in the sale of home
49. NAC 645.605 (6).         business activities and into his or her         protection insurance.46
                             personal affairs. Nevada’s Supreme
                             Court found,                                    How certain brokerage fees are labeled
                                                                             may cause RED concern. Calling a
                                 [t]here can be no justification of an       charge a name that implies the fee is
“Moral turpitude” is             interpretation of the licensing act         required by law when it is not, will
conduct contrary to              which would allow a broker to be            subject the broker to RED discipline. For
justice, honesty, or
morality and includes            honest as a broker and dishonest            instance, regulations require a broker to
offenses involving fraud,        as a property owner. A broker who           maintain brokerage transaction files for
breach of trust, perjury         is dishonest or incompetent in              five years.47 Some brokers have charged
and intentional dishonesty
for personal gain.               the real estate activities in which         their clients for this file storage by
State Bar of Nevada v.           he is involved as owner, is not             calling the charge, among other terms, a
Claiborne, 104 Nev. 115,         likely to be honest or competent            “regulatory compliance fee.” The Division
756 P.2d 464 (1988). See
                                 in his activities which are purely          has stated this is misleading “conduct
also RED Open House,
Fall 2007, page 3.               brokerage in nature. The purpose            which constitutes deceitful, fraudulent or
                                 of real estate licensure is to bar          dishonest dealing... .”48
                                 the dishonest or incompetent from
                                 entry into this occupation. ‘We             The licensee’s duty of honesty includes
                                 believe that a single standard of           the duty to deal fairly with all parties to a
                                 honesty and competency should               transaction, not just the client.49
                                 guide a broker’s real estate
                                 activities whether performing as
                                 broker or owner.’40



                             II - 9
Discipline: The Real Estate Commission         Nevada’s Supreme Court has said a            50. NRS 645.990 (1)(b).
may discipline any licensee convicted         licensee’s willful silence in the face of a
                                                                                            51. northern nv
of any crime involving fraud, deceit,         client’s expressed misunderstanding is
                                                                                            mobile home Brokers
misrepresentation or moral turpitude.         “more deceit than any other category          v. penrod, 96 Nev. 394,
It may discipline whether or not the          that the court can find... .”54 A party       398, 610 Nev. 724 (1980).
licensee pled nolo contendere (no contest)    may have a mistaken belief about the
                                                                                            52. NRS 645.252 (1).
or guilty. The Division may file criminal     property, elements of the transaction, or
charges against any person, licensee or       be ignorant of a material aspect or defect.   53. NRS 645.254 (3)(c).
not, who sells real property by intentional   If the licensee knows of the mistaken
                                                                                            54. holland realty v.
misrepresentation, deceit or fraud.50         impression, the licensee has the duty         nv real Estate Comm.,
                                              to correct the misunderstanding. If the       84 Nev. 91, 97, 436 P.2d
2. SILENCE AS DECEIT                          licensee remains silent, this is deceit as    422 (1968).
                                              much as an affirmative lie.
A corollary to the duty to be honest is the
duty to speak the whole truth and not be      If a fact is required to be disclosed by
misleading by silence.51 Generally, mere      the licensee, no instruction from a client
silence is not a misrepresentation unless     can absolve the licensee from liability for
there is a duty to speak. Licensees have      willfully withholding the information.
such a duty. Nevada’s agency laws impose
upon the licensee the duty to disclose to
each party all known material facts about
the property.52 Additionally, the licensee
must disclose to the client all known facts
about the transaction.53




                             NEVADA LAW ON FIDUCIARY DUTIES TO THE CLIENT II - 10
55. NRS 645.254 (1).

56. NRS 645.257 (3).

57. NRS 645.633 (1)(h).

58 & 59. NRS 645.252 (2)
                              D. REASONAbLE SKILL AND CARE:
and NAC 645.605 (5).                   COMPETENCY
60. NAC 645.600 (3) &
(4).

61. NRS 645.633 (1)(h)
and NAC 645.605.            1. STANDARD OF CARE

62. Doud v. las vegas
hilton Corp., 109 Nev.
                            In any transaction, the licensee is required    Elements of negligence: briefly, there are
1096, 1100, 864 P.2d 1272   to exercise reasonable skill and care.55        four elements to negligence. All four must
(1993).                     What is “reasonable skill and care?” It         exist before there is a legal cause of action.
                            is the degree of care that a reasonably         Those elements are duty, breach, cause
63. turney v. Sullivan,
89 Nev. 554, 555, 516       prudent real estate licensee would              and harm.62
P.2d 672 (1973).            exercise in similar circumstances.56 In
                            other words, the licensee must not act          To have liability there must first be a
64. hammerstein v.
Jean Dev. west, 111 Nev.    incompetently or with gross negligence.57       duty.63 The licensee’s duties are found
1471, 1476, 907 P.2d 975                                                    in statute, regulation, common law, and
(1995).                     At a minimum, a licensee is expected to         contract. Those sources outline what must
                            have the knowledge required to obtain a         be done and avoided in the licensee’s
                            then current real estate license and to act     relationship with his or her client, other
                            on that knowledge.58 The minimum is just        parties in the transaction, the public, the
                            that, a minimum. A licensee may be held         licensee’s peers and broker, and the Real
                            to a higher level of competency and skill       Estate Division.
                            if a licensee has, or claims to have, greater
                            knowledge, expertise, or a specialization.      The second element is a breach of that
Black’s Law Dictionary                                                      duty. A licensee may breach a duty by not
defines negligence as
                            The licensee must keep informed of the          doing something one is obligated to do
“culpable carelessness”.
                            current laws and regulations that impact        (“nonfeasance”); by doing something one
                            the licensee’s real estate practice.59          is not supposed to do (“malfeasance”);
                            brokers who have agents are required            or by doing something in a careless or
                            to familiarize their licensees with all         haphazard manner (“misfeasance”). For
                            relevant current federal and state laws.        example, it is nonfeasance if the licensee
                            Additionally, the broker must ensure            does not provide a copy of the brokerage
                            there is a system in place for monitoring       agreement to the client (NRS 645.300);
                            the licensee’s compliance with this             malfeasance if the licensee discloses a
                            regulation.60                                   client’s confidences (NRS 645.254(2)); and
                                                                            misfeasance when a licensee overlooks
                            2. NEGLIGENCE                                   some material term of the purchase
                                                                            agreement (NRS 645.254(4)).
                            The licensee will have liability if the
                            licensee’s gross negligence causes harm.61      The third element requires the breach
                            What is negligence? Negligence is a legal       of duty to have caused the harm.64 For
                            term used to identify unreasonable, but         instance, a listing agent inadvertently
                            generally unintentional behavior that           tells the buyers that the sellers are
                            causes another damage or harm.                  divorcing and need to sell quickly.
                                                                            This is an unauthorized disclosure of a
                                                                            seller confidence. Several weeks later

                            II - 11
the buyers, unhappy with the property           Strict liability: Under certain                65. NRS 645.633 (1)(b).
condition, terminate the escrow. The            circumstances the law may impose
                                                                                               66. Arnesano v. State,
sellers have lost the sale. In this scenario    liability strictly for violating a statute
                                                                                               Dep’t trans., 113 Nev.
the listing agent breached his duty to          or regulation without anyone being             815, 821, 942 P.2d 139
the sellers when he disclosed the sellers’      harmed.67 For example, failing to put a        (1997).
confidential information; however, the          definite termination date on an exclusive
                                                                                               67. NRS 645.630, 645.633
sellers’ loss was not a result of the agent’s   brokerage agreement eliminates the             and 645.635.
breach. There is no causal link between         broker’s right to collect a commission
the licensee’s breach and the sellers’ harm.    regardless of whether the client was           68. Bangle v. holland
                                                                                               realty inv. Co., 80 Nev.
The agent’s negligent act of disclosing the     harmed.68                                      331, 393 P.2d 138 (1964).
divorce was not the cause of the buyers
rejecting the property.                         “gross negligence” is negligent                69. hart v. kline, 61
                                                                                               Nev. 96, 116 P.2d 672
                                                behavior with a reckless disregard for
                                                                                               (1941). See also
Nevertheless, this does not mean the            the consequences of one’s actions. It
                                                                                               NAC 645.605
sellers are without recourse for the agent’s    requires the licensee to have understood
breach. The sellers may file a complaint        and ignored the potential harm.69 The
with the Division and the licensee may be       statutes generally impose regulatory
subject to regulatory discipline.65             liability on the licensee for the licensee’s
                                                gross negligence.
Finally, there must be damages or harm.
Harm occurs when the licensee breaches          NAC 645.605 lists a series of actions that
a duty and that breach causes an injury,        if not followed, the Commission may
loss or detriment to the client. Often, a       consider the lack of doing those things,
client’s loss may be remedied by money          gross negligence.
(damages).66 There are various legal
restrictions on the amount and type
of damages a person may claim under
negligence. At no time should a licensee
discuss negligence damages with a client.




                              NEVADA LAW ON FIDUCIARY DUTIES TO THE CLIENT II - 12
70. NRS 645.252 (1)(a).

71. NRS 645.257 (3).
                              E . D I S C L O S U R E : “ S H O U L D H AV E
72. NRS 645.252.
                             K N O W N ” – D U T Y T O I N V E S T I G AT E
73. garff v. J.r. Bradley
Co., 84 Nev. 79, 85, 436
P.2d 428 (1968).            1. SOURCE
74. woods v. label
investment Corp., 107       The licensee has a duty to disclose to each   The law will not allow a licensee to ignore
Nev. 419, 812 P.2d 1293     party to the transaction any material and     “danger signals” or “red lights,”74 to
(1991) and Collins v.       relevant facts, data, or information which    gloss over conflicting information, or to
Burns, 103 Nev. 394, 741
P.2d 819 (1987).            he or she knows, or which, by the exercise    act carelessly in obtaining material facts
                            of reasonable care and diligence, should      about the property under the excuse that
75. NRS 645.252 (1)(a).     have known, relating to the property.70       the licensee did not “know for certain”
76. lowe v. real Estate
                                                                          relevant facts.
Division, 89 Nev. 488,      Standard of Care: The standard of care
490, 515 P.2d 388 (1973).   is the legal level against which a person’s   The question becomes what facts, data or
                            behavior is judged. It stems from the         information must the licensee investigate
                            idea that a “reasonable person” will act      and how thoroughly? A licensee is
                            in a certain way - usually with prudence,     required to investigate “any material and
                            diligence, and care not to harm anyone        relevant facts, data or information relating
                            or anything. This is the general standard     to the property” using “reasonable care
                            of care.                                      and diligence.”75

                            A real estate licensee is assumed to have     2. RELATING TO THE PROPERTY
                            a superior knowledge of real estate
                            transactions. With that superior knowledge    The duty to investigate covers those
                            there is a heightened standard of care.       facts relating to the property. “Relating
                            For a real estate licensee, the minimum       to the property” normally means items
                            standard of care is the knowledge to pass a   specific to the individual property, but
                            then current real estate license exam.71      may include the investigation of some
                                                                          information which may impact the
                            This heightened standard of care requires     property or its use such as a proposed
                            a licensee to know and follow all the         highway, shopping center, or school.76
                            duties imposed by law. Disclosure is a core
                            duty. A licensee must disclose any material   a. when must A licensee investigate –
                            facts relating to the property of which the   Generally, a licensee is responsible for the
                            licensee has actual knowledge.72              reasonable investigation of information,
                                                                          data or facts if: 1) the information
                            Actual knowledge: What is actual              concerns an item that directly impacts the
                            knowledge? The court has found,               property; 2) the licensee has volunteered,
                                                                          or claims an expertise in, any relevant
                               [a]ctual knowledge consists not only       information; 3) the information is required
                               of what one certainly knows, but           to be disclosed by law; or 4) the broker
                               also consists in information which         has explicitly contracted with the client
                               he might obtain by investigating           to be responsible for obtaining certain
                               facts which he does know and               information.
                               which impose upon him a duty to
                               investigate.73                             impacts the property: The licensee must
                                                                          investigate any item directly related to,
                                                                          or that impacts, the physical condition of

                            II - 13
the property. For example, in Epperson         The real estate licensee has a duty to          77. Epperson v. roloff,
v. Roloff, (1986),77 the listing agent was     investigate whether or not a unit has a         102 Nev. 206, 719 P.2d
                                                                                               799 (1986).
told by the seller the home had a “solar       fireplace or wood burning stove and then
implication.” The agent did not ask the        to provide the seller with the required         78. Washoe County,
client to explain what a solar implication     disclosure form.79 However, the licensee        District board of
                                                                                               Health Regulation
might be. Nevertheless, he told potential      would not be required to determine if an
                                                                                               Governing Air Quality
buyers the house had a solar feature           existing wood stove was in compliance           Management, Section
which really saves on winter heating           with Code. (That type of inspection             040.051§A(2)(b).
costs. The feature turned out to be a hole     requires a county certificate.)
                                                                                               79. NRS 645.252 (4)(b).
in the roof covered with corrugated sheet
metal painted black. The buyers sued the       Contracted investigation: Finally, the          80. holland realty v.
broker and sellers for misrepresentation.      broker may, by contract, assume a duty          nv real Estate Comm.,
                                                                                               84 Nev. 91, 98, 436 P.2d
The listing agent had a duty to the buyers     to investigate and disclose facts that
                                                                                               422 (1968).
to disclose all relevant facts about the       are beyond those required by law. For
property. He breached that duty by not         example, the broker and client may agree
investigating and disclosing what the          that the broker will investigate whether
“solar feature” really was.                    the property can be zoned for a particular
                                               future use. At all times the broker must be
The level of investigation imposed by          careful not to provide services requiring a
the law does not require the licensee to       license, permit or certification which the
become a “property inspector,”                 broker does not have.
NRS 645.252(4)(c) but it does require
reasonable and common sense inquiry            Remember, the purpose of the duty to
into the physical condition of the property.   investigate is to find and disclose
                                               material and relevant facts about the
volunteered information: When                  property so that a principal may make
the licensee has volunteered specific          an informed decision.
information or claims an expertise in a
certain topic, the licensee will be held       b. what must Be investigated – When
responsible for its reasonable accuracy.       a fact relates to the property, the licensee
This does not mean the licensee                is required to investigate if it is “material
guarantees the information; however,           and relevant.” The Nevada Supreme
                                                                                               Professional property
the licensee must take reasonable steps        Court, quoting the Restatement of Agency        inspectors are licensed by
to insure the information is up-to-date        §390, stated,                                   the state and regulated by
and sufficiently correct. For example,                                                         the Real Estate Division
                                                                                               under NRS 645D.
a property fronts an extensive tract of           A fact is material… if it is one which
undeveloped land. If the licensee states          the agent should realize would be
the land is controlled by the bureau              likely to affect the judgment of the
of Land Management and won’t be                   principal …which he should realize
developed, that volunteered statement             [is] likely to have a bearing upon the
must be accurate and current. before the          desirability of the transaction…80
licensee volunteers facts, he or she has a
duty to investigate the truthfulness of any    Anything impacting the physical
statement.                                     condition of the property is material
                                               and relevant. Anything that affects
Disclosure required by law: A licensee         the property’s value or use is material
has a duty to investigate property facts       and relevant.
that may require certain disclosures
obligatory by law. For example, Washoe
County, Nevada, has a Solid-Fuel burning
Device (wood stove) regulation.78

                             NEVADA LAW ON FIDUCIARY DUTIES TO THE CLIENT II - 14
81. NRS 40.770.              c. Exemptions – Certain material facts           1. The licensee did not know of the non-
                             that may be relevant to the client are              disclosure, and
82. NRS 40.770 (4).
                             by law not considered material to the
83. NRS 645.252.             transaction. With certain restrictions,          2. The information is of public record.86
                             these facts are exempted from the
84. prigge v. South
Seventh realty, 97 Nev.
                             licensee’s duty of disclosure and                The licensee will be held liable for non-
640, 641, 637 P.2d 1222      investigation. Thus, the licensee does           disclosure if the licensee knows the
(1981).                      not have any liability if those facts are        client made a misrepresentation and did
                             not disclosed.81                                 not tell the recipient that the statement
85. NRS 645.257 (2).
                                                                              was false.87 As with absolute fidelity,
86. NRS 645.259 (2).         There are restrictions to each of these that     the courts will not allow a licensee who
                             the licensee must know. For example,             knew better to hide behind a client’s
87. NRS 645.259 (1).
                             a seller does not need to disclose if the        misrepresentation.88 The bottom line?
88. NRS 645.259 (2)          property was a site of a felony. The             The licensee may rely on information
referring to NRS 645.252.
                             restriction is if the property was the site of   provided by the client unless such reliance
89. woods v. label           a meth lab and not “rehabilitated,” then         is unreasonable. If a licensee,
investment Corp.107          the seller, and licensee, must disclose.
Nev. 419, 426, 812 P.2d
1293 (1991).                 These exemptions may be waived if the               has information which would serve
                             broker has an agreement with the client to          as a “red light” to any normal
90. NRS 645.254 ( 3)(c).
                             investigate or disclose any of the above.82         person of her intelligence and
91. NRS 645.252 (4)(b).                                                          experience [or]… is aware of facts
                             Statements by Experts: A licensee is not            from which a reasonable person
                             responsible for investigating or verifying          would be alerted to make further
                             any statements of, or work performed by,            inquiry, then he or she has a duty
                             a licensed or certified professional, expert,       to investigate further and is not
                             or property inspector licensed under NRS            justified in relying on the seller’s
                             645D.83 For example, if a licensed roofer           description of the property.89
                             has given the buyer a report that the roof
                             is sufficient, the licensee is not responsible   3. CONCERNING THE TRANSACTION
                             for climbing on the roof to verify the
                             roofer’s professional opinion.                   Facts that concern the transaction must
A “material fact” is one                                                      be disclosed to the licensee’s client.90
that is significant or       d. representations of the Client – The           This disclosure may require the licensee
essential to the issue or    licensee has the right to rely on the client’s   to reasonably investigate certain aspects
matter at hand.
                             representations about the property unless        of the transaction. These may include,
See "Confidential Material   the licensee knows, or should know,              but are not limited to, facts about the
Facts” on page II - 7.       the information is false. The Nevada             escrow, relevant loan information, or the
                             Supreme Court has said it will not “hold         status of other transactions (for example,
                             an agent… responsible for an independent         contingency sale property).
                             search for concealed facts, in the absence
                             of any information which would have put          However, a licensee is not required and
                             the agent on notice.”84                          has no duty to conduct an independent
                                                                              inspection of the financial condition of
                             by law, it cannot be assumed that                a party to a real estate transaction. The
                             the licensee has the client’s knowledge          licensee should not be acting as a loan
                             about the property.85 Furthermore, a             officer, financial or tax consultant.91 A
                             licensee cannot be held liable for the           licensee should not request, investigate,
                             Seller’s non-disclosure of information           or review a party’s credit report.
                             on the Seller’s Real Property Disclosure
                             Statement, if:


                             II - 15
A licensee may reasonably rely on               time and effort necessary to gather the      92. Collins v. Burns, 103
financial information provided by the           required paperwork and review it for “red    Nev. 394, 741 P.2d 819
                                                                                             (1987).
client. In Collins v. Burns (1987),92 Golanty   lights”. It means looking at the property
was the listing agent of a small liquor         and comparing it with the seller’s           93. NRS 645.252 (1)(a).
store owned by burns. He prepared a             statements to ensure the property is what
sales-and-expense fact sheet and a profit       is represented. During this review, the
chart using financial figures provided by       licensee is looking for something out of
his client. Relying on the chart and the        the ordinary that either contradicts what
licensee’s fact sheet, Collins purchased        has been stated, differs from what the
the store. She later defaulted on the note      licensee knows, or is otherwise amiss.
and burns sued for the unpaid principal.
Collins countersued and claimed she was         This reasonable level of investigation
defrauded as the information on the fact        does not mean a licensee should interpret
sheet and chart were grossly inaccurate.        documents, determine their legal
The court found for Collins. Although           consequences, or act as an appraiser,
Golanty drafted the chart and fact sheet,       property inspector, loan officer, lawyer,
he was not a party to the Supreme Court         or private investigator. As discussed
case. He had reasonably relied on the           elsewhere, the licensee should not attempt
information provided by his client and          to perform any service not specific to the
there was nothing in that information that      real estate transaction.
would have alerted Golanty to his client’s
misrepresentation.                              The duty to investigate does require the
                                                licensee to have sufficient knowledge to
4. LEVEL OF INVESTIGATION                       identify any warning signs and to point
                                                out these warning signs to the client.
A licensee is not required to conduct           Once a concern is identified, the licensee
an investigation of the condition of the        should suggest the client obtain further
property which is the subject of the real       professional services.                       “Statement” refers not just
estate transaction. (NRS 645.252(4)(c)) This                                                 to what is said, but to all
                                                                                             the various representations
statute relieves the licensee of the duty
                                                                                             of the seller such as the
to act as a property inspector. Property                                                     multiple listing service
inspectors are licensed individuals and are                                                  property profile print-out,
experts in their field. Under this statute,                                                  the Seller’s Real Property
                                                                                             Disclosure Form, and
a licensee is not required to perform acts                                                   relevant advertising.
that should be done by licensed property
inspectors. However, this does not relieve
the licensee from his or her duty to
exercise reasonable care and diligence. If
a question arises as to the condition of the
property, the licensee must address that
issue by referring the client to a qualified
expert. A licensee will not escape liability
for not exercising reasonable care and
diligence by using the argument that he or
she has no duty to investigate.

Once a licensee is required to investigate,
how detailed should that investigation
be? The statute says the licensee must
investigate using reasonable care and
diligence.93 Reasonable care is taking the

                              NEVADA LAW ON FIDUCIARY DUTIES TO THE CLIENT II - 16
94. NRS 645.254 (3)(d).

95. NAC 645.605 (3).




                                    F. S U P P L E M E N TA R Y S E RV I C E S
                          1. bEYOND THE LICENSEE’S EXPERTISE              2. bEYOND THE LICENSEE’S
                                                                             AUTHORITY
                          If a licensee is asked by a client to perform
                          services outside the licensee’s expertise,      A licensee may be disciplined for
                          the client must be told the matter is           providing specialized professional
                          beyond the licensee’s current proficiency       services outside the licensee’s authority.95
                          and advise the client to obtain guidance        It does not matter if the advice is accurate
                          from an expert.94                               or the service well done. Liability lies
                                                                          in doing the thing, not in its result.
                          This does not mean the licensee cannot          “Matters beyond the expertise of the
                          expand into new areas. It does mean if          licensee” include, but are not limited to,
                          the licensee is unfamiliar with a property      activities that requires a license, permit or
                          type or service, the licensee is required to    professional certification. If the licensee
                          disclose that fact to the client and obtain     does not have such a license, permit or
                          the assistance of a qualified authority         certification, the activity is automatically
                          before proceeding.                              beyond the licensee’s authority.




                          II - 17
A licensee must be aware of the boundary       unauthorized practice of law: The             96. goldstein v. hanna,
between authorized real estate services        unauthorized practice of law is strictly      97 Nev. 559, 635 P.2d 290
                                                                                             (1981), Justices Mowbray
and unauthorized services. Often a             prohibited in Nevada.98 It is monitored
                                                                                             and Manoukian
licensee is requested by a client to advise    by the State bar of Nevada under the          dissenting.
or act on a matter for which the licensee      control of the Nevada Supreme Court.99
                                                                                             97. Real Estate
is not authorized. Sometimes however,          Unfortunately, there is no statute or
                                                                                             Commission
the licensee, willingly and without            regulation which defines what activities      Disciplinary Fine Report,
instruction, crosses this boundary.            constitute the practice of law.               1/95 through 9/30/04.
                                               Through case law, the courts have
                                                                                             98. NRS 7.285 (1).
In Goldstein v. Hanna (1981),96 Callahan       provided a list of some activities that
was the listing agent for a condominium        are considered “practicing law.” These        99. NRS 7.725.
owned by Hanna. Goldstein and Hanna            include discussing with a client the
                                                                                             100. pioneer title
signed a lease with option to purchase to      legal effect of an act; interpreting legal
                                                                                             insurance & trust Co.,
close by December 9, “unless exercised         provisions in a document; discussing the      v. State Bar of nevada,
prior thereto.” During the lease period,       rights or responsibilities of the parties;    74 Nev. 186, 326 P.2d 408
Goldstein exercised the option and signed      selecting and providing pre-printed legal     (1958).

a purchase agreement with another buyer        documents; or determining the legal           101. NRS 645.035.
using a double escrow. both closing            sufficiency of any action or document.100
dates were set for August 29. Prior to                                                       102. NRS 645.252(3).
the closing, the ultimate buyer backed         Many of the actions done daily by real        103. NRS 645.252(2).
out. Goldstein contacted Callahan              estate licensees come close to those listed
who advised him the option was still           above. Some of these are found in the         104. NRS 645.254(3)(d).
good until December 9. This was both           very definition of a real estate broker.101
                                                                                             105. NRS 645C.030.
a misstatement of the law and beyond           Some are required by the broker’s
Callahan’s authority. Goldstein, justifiably   statutory duties.102 Other activities are     106. NRS 645C.040.
relying on Callahan’s statement, did           inherent in the nature of the broker/
                                                                                             107. NRS 645C.260.
not close on August 29. The seller then        client relationship.103 Nevertheless, the
cancelled the escrow and attempted to          unauthorized practice of law is a very fine
get the property back. Goldstein sued          line which the licensee must stringently
Hanna for specific performance citing his      guard against stepping over. As with any
reliance on Callahan’s statement. Though       question of unauthorized professional
the court’s decision was split, Hanna          counsel, the licensee should suggest the
eventually lost the property.                  client obtain advice from an expert.104

The two areas in which a licensee is most      Appraisal and the Bpo: An “appraisal”
likely to provide unauthorized services        is “an analysis, opinion or conclusion,
are with legal and appraisal activities.97     written or oral, relating to the nature,
                                                                                             An option once exercised,
Clients will ask a licensee to tell them       quality, value… of, identified real estate    even if before the option’s
their rights under a contract, or ask what     for or with the expectation of receiving      ultimate cut-off date,
their legal options are. Additionally,         compensation.” 105 In Nevada, only            terminates the option
                                                                                             and the contract becomes
clients often ask the licensee what a          appraisers are authorized to prepare an       a bilateral purchase
property is worth or the value of a            appraisal. 106 Appraisers are licensed and    agreement. Once the option
business. because these activities are so      regulated by the Real Estate Division. 107    is exercised, if the sale isn’t
                                                                                             completed, the option cannot
intricately woven into the fabric of a real
                                                                                             be resurrected.
estate transaction, the licensee can easily
slip into providing unauthorized answers                                                     Ubiquity does not remove
and services. If he or she does so, it is a                                                  illegality.
violation of not only NRS 645, but of the
statutes regulating those professions.




                             NEVADA LAW ON FIDUCIARY DUTIES TO THE CLIENT II - 18
108. RED bOP Advisory     One common real estate activity is often      other Services: Even though client
Opinion (2007)            confused with an appraisal. A broker’s        requests for legal and appraisal services
109. NRS 645C.150 (4).    price opinion (bPO) is a compilation of       are most common, those are not the only
                          recent sales of similar properties in the     professional services a client may ask for
110. NAC 645.605 (3)      general location of the target property.      – or an enthusiastic licensee may attempt
and NRS 645C.260.
                          Real estate agents may prepare a bPO          to provide. Other services include, but
111. RED Advisory         for prospective clients to help establish     are not limited to, home inspection,
Opinion, broker Prince    a realistic sale price. 108 A real estate     tax and income advice, and property
Opinions (bPO’s), Sept.
                          licensee is exempt from the appraisal         management. When asked to do any
2007.
                          statutes only when providing limited          unauthorized activity, the licensee must
112 NRS 645.254 (3)(d).   services within the scope of a real estate    either have the appropriate license, permit
                          license. 109                                  or certification, or refer the client to the
                                                                        appropriate professional.112
                          Often lenders and other interested entities
                          will request a licensee to give them          The licensee must be aware of the pitfall
                          an estimate of value for a fee without        of relying on a client’s authorization to
                          intending to utilize the licensee’s real      perform any unauthorized activity. As
                          estate services. A licensee providing this    with many areas of real estate agency law,
                          service would be in breach of appraisal       a client’s instruction does not make an
                          law and subject to discipline from both       illegal act legal.
                          the Real Estate Commission and the
                          Appraisal Commission.110

                          To avoid crossing into appraisal services,
                          the bPO should never be prepared for a
                          separate fee or charge or for

                               “…any purpose other than to assist
                               a seller in determining a price to
                               list a property. Real Estate licensees
                               performing bPO’s for any other
                               purpose are in violation of NRS
                               645C and will be subject to a fine
                               of up to $5,000.00.” 111




                          II - 19
                                 G. REVIEW


The licensee’s duties are found in statute,     The licensee must exercise reasonable
regulation, and in the common law.              skill and care toward all parties in the
Most codified duties evolved from the           transaction. This includes not acting
common law using common law terms               in a negligent manner. Negligence is
such as “fiduciary,” “absolute fidelity,”       unreasonable, but generally unintentional,
“negligence,” and “should have known.”          behavior that causes harm.
Generally, these terms are not defined in
statute or regulation.                          The term “should have known” creates
                                                the duty to investigate. The licensee
Absolute fidelity means putting the             must reasonably investigate material
client’s interests before the licensee’s        and relevant information relating to the
interest. A licensee may have an interest       property and the transaction. This duty
in the property or in the transaction. This     has limitations and restrictions, but those
interest must be disclosed in writing.          restrictions do not allow the licensee
Sometimes, even if an interest is disclosed,    to ignore obvious warning signs that
a licensee may not act on that interest if it   something is amiss.
would harm the client.
                                                Lastly, the licensee should be cautious of
A licensee must be honest and not act           activities outside the licensee’s expertise
in a deceitful, fraudulent or dishonest         or authority, especially legal or appraisal
manner in either the licensee’s personal or     services.
professional Life. Silence, when there is a
duty to speak, is deceit.




                              NEVADA LAW ON FIDUCIARY DUTIES TO THE CLIENT II - 20

				
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