California real estate companies might need to start taking extra care when operating as agents for both the buyer and seller of a property after a state Supreme Court ruling last week.

In a closely watched case involving a luxury Malibu property sale in which there were discrepancies in square footage calculations, the high court ruled that real estate agents from a single brokerage firm who are working both sides of a residential transaction have an equal disclosure responsibility to the buyer.

The ruling sets a precedent that will likely prompt brokerages to spend time and resources on better educating and training agents on their fiduciary responsibilities, said Dan Schechter, a professor at Loyola Law School with expertise in real estate finance and law.

“I’m sure that dual agents are going to be erring on the side of disclosure from now on,” he said.

The current dual agency disclosure statute states what agents can’t share – such as a seller’s willingness to come down on price – but it doesn’t clearly explain what agents should communicate, said Schechter.

Although disputes over the square footage of a property are common, and most agreements have built-in disclaimers that advise buyers to obtain their own measurement, the recent case will likely spur more stringent carve-outs that clearly put that responsibility on the buyer, Schechter said.

Although the ruling deals specifically with residential sales, it might have similar implications in the commercial market, he said.

“The Supreme Court decision deals with that narrow situation when you have the same firm and yet different sales agents,” said Eric Sussman, professor at UCLA’s Ziman Center for Real Estate. “In that case, because there’s the same parent brokerage firm representing both sides, the fiduciary duties are heightened and increase.”

In the Malibu case, Honk Kong resident Hiroshi Horiike employed a Coldwell Banker Residential Brokerage Co. agent to help him purchase the home with an ocean view in 2007 for almost $12.3 million in cash. The seller of the house also used a Coldwell agent, making it a dual agency deal, which is legal in California but not in all states.

After the sale was complete, Horiike discovered the square footage of living space was less than 9,500 square feet, not the 15,000 square feet that was advertised. He sued Coldwell on multiple grounds, including breach of fiduciary duty.

Upholding an appeals court’s ruling, but reversing a lower court’s decision, the Supreme Court said the seller’s agent was just as responsible as the buyer’s agent to share information about the discrepancy in measurements.

In its decision, the court recognized that there are inherent concerns with dual agencies and the potential for conflicts of interest, but said state law does not directly address these issues. Longstanding legislation only requires agents in real estate sales to disclose if they are representing both parties.

The court sent the Horiike case back to trial court to determine possible liability and damages.

Schechter said dual agencies have many advantages, such as collecting double commissions and being able to streamline the purchase process.

“As long as unfair advantage isn’t taken by one side or another,” Schechter said, “a dual agency can be a very good thing.”