Clarifying Real Estate Licensee Liability: No Private Cause of Action Under the South Carolina Residential Property Condition Disclosure Act and the Justifiable Reliance Standard in Negligent Misrepresentation Claims

Introduction

Rory M. Isaac and Kimberly J. Isaac (“the Isaacs”) purchased a residential property in Georgetown County, South Carolina, represented by real estate agent Laura Kopchynski on behalf of sellers Jacqueline and Thomas Onions (“the Onionses”). After closing, the Isaacs discovered excessive moisture, active wood‐decay fungi, and water intrusion in the home’s crawl space. They filed suit against Kopchynski, asserting claims of fraud, negligent misrepresentation, civil conspiracy, and violation of the South Carolina Residential Property Condition Disclosure Act (“Disclosure Act”), among others. The Circuit Court granted summary judgment in favor of Kopchynski on all claims; the Court of Appeals reversed as to negligent misrepresentation and the Disclosure Act claim; and the Supreme Court of South Carolina granted certiorari.

The core issues before the Supreme Court were: (1) whether the Court of Appeals applied an incorrect standard of review; (2) whether the Isaacs created a genuine issue of material fact on negligent misrepresentation; and (3) whether the Disclosure Act provides a private cause of action against real estate licensees. The Supreme Court reversed the appellate court, reinstating summary judgment on both negligent misrepresentation and the Disclosure Act claim.

Summary of the Judgment

In a unanimous opinion authored by Justice Verdin, the Supreme Court held:

1. Negligent Misrepresentation: The Isaacs failed to show justifiable reliance on any misrepresentation by Kopchynski regarding a pest control report. Their own agent testified they never relied on her characterization of the prior report and instead commissioned their own inspection, as the Disclosure Act and license regulations place the duty of property inspection squarely on buyers.
2. Disclosure Act Claim: The statutory text of the Disclosure Act creates a private cause of action only against property owners who “knowingly violate” disclosure duties; it contains no provision authorizing purchasers to sue real estate licensees for violation of the Act. Real estate licensees are subject to profession‐wide regulations but not to private statutory liability under the Disclosure Act.

Accordingly, the Supreme Court reversed the Court of Appeals on both points and reinstated summary judgment for the licensee, Laura Kopchynski.

Analysis

Precedents Cited

• Kitchen Planners, LLC v. Friedman, 440 S.C. 456, 892 S.E.2d 297 (2023): Clarified that summary judgment in South Carolina is governed by the “genuine issue of material fact” standard, not the “mere scintilla” rule.
• Quail Hill, LLC v. County of Richland, 387 S.C. 223, 692 S.E.2d 499 (2010): Established elements of negligent misrepresentation and held that experienced parties cannot justifiably rely on casual statements when they have the means to verify facts.
• Chastain v. Hiltabidle, 381 S.C. 508, 673 S.E.2d 826 (Ct. App. 2009): Confirmed that the Disclosure Act places the inspection duty on buyers and that real estate licensees have no duty to investigate latent defects beyond truthful disclosure.
• Overcash v. S.C. Elec. & Gas Co., 364 S.C. 569, 614 S.E.2d 619 (2005): Set forth the guiding principle that private causes of action arise only where legislative intent is clear in statutory language.

Legal Reasoning

1. Standard of Review
The Supreme Court reaffirmed that Rule 56(c), SCRCP, demands summary judgment when there is “no genuine issue as to any material fact” and the moving party is entitled to judgment as a matter of law. The “mere scintilla” standard is inapplicable in South Carolina following Kitchen Planners.

2. Negligent Misrepresentation
To succeed, a plaintiff must show six elements, including justifiable reliance. The Court emphasized: (a) licensees must disclose known material defects but are not insurers of property condition; (b) buyers have an affirmative duty to inspect; and (c) casual statements, or those outside the licensee’s expertise, do not give rise to liability. The Isaacs’ own agent confirmed they did not rely on Kopchynski’s description of the “June CL‐100” pest report and instead commissioned their own “July CL‐100” inspection.

3. Private Cause of Action Under the Disclosure Act
The Act specifically authorizes suits against owners who knowingly misstate or conceal material defects (§27‐50‐65) and grants immunity to licensees who truthfully disclose what they know or have reason to know (§27‐50‐70). It does not mention licensee liability. Applying the expressio unius canon, the Court concluded the legislature intentionally omitted a private remedy against licensees.

Impact

This decision carries significant implications:

• Clarification of Licensee Duties: Reinforces that real estate agents owe duties of honesty but are not guarantors of property condition or subject to private statutory liability under the Disclosure Act.
• Buyer Inspection Responsibility: Confirms that purchasers must conduct their own inspections and cannot shift this burden to listing agents.
• Litigation Strategy: Future negligent misrepresentation claims will require concrete proof of justifiable reliance on a licensee’s statements, especially where parties have equal or superior access to factual data.
• Statutory Construction Guidance: Demonstrates the Court’s strict reliance on statutory text and canons like expressio unius to determine legislative intent regarding private causes of action.

Complex Concepts Simplified

• Summary Judgment: A pre-trial procedure where the court decides the case as a matter of law if no factual disputes require a jury or judge to weigh evidence.
• Negligent Misrepresentation: A false statement made carelessly that causes another to suffer financial harm when they justifiably rely on it.
• Justifiable Reliance: The injured party must show it was reasonable under all circumstances to trust the statement without further verification.
• Private Cause of Action: A right granted by statute for individuals to sue others when the statute is violated; here, the Disclosure Act grants that right only against owners, not agents.
• Expressio Unius Est Exclusio Alterius: A rule of statutory interpretation meaning expressly listing one item implies exclusion of items not listed.

Conclusion

The Supreme Court’s decision in Isaac v. Kopchynski delivers two pivotal clarifications: real estate licensees in South Carolina cannot be sued under the Residential Property Condition Disclosure Act by private purchasers, and negligent misrepresentation claims against licensees must be supported by evidence of justifiable reliance. This ruling underscores the buyer’s duty to inspect, delineates the scope of a licensee’s responsibilities, and will guide practitioners in assessing and pleading claims involving property‐condition disclosures and agent statements.