Legal Question in Real Estate Law in California

You are probably responsible, depending on the actions. You may also be able to cross sue the agent.

Whether you are legally liable will depend to some extent on whether the agent was an employee or an independent contractor. In general, an employer is not able to sue an employee; the cost of having to defend yourself is also normally not considered a damage for which you can sue. If you merely rent office space, provide some clerical support, help with advice, the agent might be considered an independent contractor, who you could sue, but at this point you have no damages. If you are found to be at fault for his actions, the he is not an independent contractor; if he is an independent operator you probably can not be found at fault. sort of a Catch-22.

Talk to the plaintiff's attorney; see if you co-operate he will drop the suit against you. Find out what he alleges against you and if you can answer without harming yourself. You need to be careful since you are dealing with an attorney who is adverse to you; do not let the conversation be taped or recorded by anyone. You probably will need to file a cross-complaint against the agent for indemnifaction and to provide you with an attorney for a defense of the case. Check with your local Broker Association as to what they can do for you.

You should refer the complaint to your liability insurance carrier. It will know exactly how to handle the matter and should retain counsel to defend you.

I disagree with Mr. Shers, to some extent. A real estate agent in California must always have a supervising real estate broker. As a practical matter, many broker-salesperson arrangements are structured as "independent contractor" relationships, rather than as "employer-employee." Although such "independent contractor" arrangements are valid for purposes of defining the legal relationship between the broker and the salesperson, brokers and salespeople cannot evade their statutory and regulator obligations with such an arrangement. "All obligations created under Section 10000, and following, all regulations issued by the commissioner relating to real estate salespersons, and all other obligations of brokers and real estate salespersons to members of the public shall apply regardless of whether the real estate salesperson and the broker to whom he or she is licensed have characterized their relationship as one of 'independent contractor' or of 'employer and employee.'" (Bus. & Prof. Code, sect. 10032, subd. (a).)

Ntowithstanding the salesperson's alleged "independent contractor" status, the broker under whom that salesperson acts remains vicariously liable, under the doctrine of respondeat superior, for the salesperson's tortious acts within the course and scope of the licensing activities. "We are satisfied, accordingly, that while it may be a question of fact whether in each case a real estate salesman is an employee within the common law definition of master and servant, the Legislature has, by virtue of statutory enactment, made such a salesman an agent of the broker as a matter of law. A consideration of the several statutory provisions applicable to a real estate salesman impels the conclusion that such person can act only for, on behalf of, and in place of the broker under whom he is licensed, and that his acts are limited to those which he does and performs as an agent for such broker." (Gipson v. Davis Realty Co. (1st Dist. 1963) 215 Cal.App.2d 190, 206.)

I do agree with Mr. Whipple that you should tender defense of the complaint to your insurance carrier. If you do not have insurance, or your company denies the defense, I suggest seeing a competent real estate attorney as soon as possible.

You have received good answers. I write only to point out that whether a person is an employee or an "independent contractor" doesn't matter even without the statutory and regulatory provisions, on the issue of your liability to a third party. A principal is liable for the acts of their agent within the scope of the agency. You do not have to hire someone as an employee for them to be your agent. The only relevance of employee versus contractor is you cannot generally counter-sue an employee, and in fact must indemnify them.