Brokerage—Absent a Contractual Obligation, Real Estate Brokers Do Not Have Duty to Conduct Background Checks On Prospective Tenants—Plaintiff Alleged That Broker Represented That It Conducted a Background Check—Although No Duty to Investigate the Suitability of Prospective Tenant, If Broker Had Information That Materially Affected the Transaction, Such as a Criminal History, Broker Had a Duty to Disclose Such Information—Brokers Do Not Have a “Legal Duty to Provide Legal Advice” as to Municipal Leasing Requirements

AN OWNER SUED a real estate brokerage firm (broker). The owner had permitted the broker to show an apartment to prospective tenants. The tenants subsequently signed a lease with the owner. The owner alleged that the broker had assured the owner that the prospective tenants were “reputable” and that the broker “had performed a background check.” The tenants had moved into the apartment, but had allegedly failed to pay any rent. The owner had evicted the tenants.

The owner alleged that she had learned of the tenant's “criminal past” and the broker had never informed it of such history, despite claiming to have performed a background check and vouching for the tenants' “good reputation.” The owner further alleged that the broker never advised the owner of a municipal requirement for a rental permit. The owner asserted claims for “breach of fiduciary duty of due care,” “breach of fiduciary duty of undivided loyalty, breach of fiduciary duty of full disclosure,” “violation of a principal's rights under New York Property Law §443″ and “breach of an implied covenant of good faith and fair dealing.” The owner sought damages for, inter alia, “unpaid rent, fuel, electric,…, as well as legal” fees.