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Question DetailsAsked on 10/29/2016

Is my NJ realtor reponsible for referring her contractor friend to me who stole my deposit?

A NJ realtor referred her friend to me to do work at my home before listing it for sale. Her friend took my deposit and never did any work. The police have now filed theft charges against the contractor, but Is the realtor liable for a negligent referral and if so, what action can be taken against her?

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1 Answer


You don't say if you attempted to get the deposit back or not, what contact you attempted or successfully had with the contractor, or what response the contractor gave you - might be this was not fraud, but just poor business management, no definitive performance period was specified so the contractor did not feel he/she was remiss at this time, or he/she had business or personal problems causing delay in getting the work started but there was no criminal intent.

You also don't say how long the contractor had the deposit without doing any work, or what the work was and how long it should have taken - and if there wqere any long leadtime items to be ordered which could have held up the start of the upgrades/repairs.

The fact the police filed theft charges may or may not mean anything - some police departments investigate fairly well before filing charges, others will file charges just on a signed complaint from someone like you - so there might have been criminal intent to defraud on the contractor's part, it might be a misunderstanding, or might just be due to sloppy contracting or poor business procedure or inexperience on his/her part.

Unless she was receiving an illegal kickback for the referral, or knew (or had heard from credible sources) that the contractor was crooked or not legitimately licensed, I don't see any negligence so commonly no legal recourse there. It also partly depends on HOW she phrased it - assuming you asked if she knew a good contractor to do the upgrades/repairs, if she said she "recommended" this company or "this company is a good one to use" that is a definitive referral and might fall under her professional liability umbrella. If she said something like "I have a friend who does that kind of work" or "here are a couple of names of companies I have heard of that do that kind of work" that would not be a definitive referral - just a passing on of knowleddge of people in the business, so not likely to invoke any liability on her part.

But a top-notch attorney might be able to make a case that the referral was a professional act by the realtor, therefore her professional liability insurance should cover it. A good attorney might make a go of it on that basis - or the realtor might refund the money herself to avoid the claim and bad press, especially if the deposit was not a lot of money. Of course, whether or not you had a professional relationship with the realtor (i.e. were you already discussing the sale or even more important, had you signed the listing with her) might make a big difference in the chances of winning the case, too.

Though of course talk to the realtor - not only so she stops referring this person, but she might (as a friend and professional referrer) be able to put pressure on the contractor to refund your money.

Also - if you try to recover from the realtor, bear in mind the effect this has on your listing - likely she will back out of the listing on a conflict of interest basis (hard to work hard and do an honest best effort trying to sell a house for someone who is suing you, for instance), so that could throw a monkey wrench in the listing.

If the contractor had bonding and insurance (you did make sure of that, right ?) then the bonding company could be contacted to call the bond - and for the bonding company to get another contractor to do the job under the specified contract terms or to refund the money. Also, if fraud was involved like it sounds it might have been, then the contractor's liability insurance should cover you loss on that count also.

Also - don't get another contractor onto the work until the previous one is formally terminated - and if you do that, best to file any liability claim against the contractor's bonding or insurance companies first because (especially the bonding company) may try to make good on the first contractor's responsibilities. You do NOT want two contractors legally bound to do this job at the same time.

Answered 3 years ago by LCD

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