A California listing agent discovers that the property has a leaking underground storage tank, constituting environmental contamination. The seller instructs the agent to withhold this information from prospective buyers. What must the agent do?

Correct Answer

B) Disclose the contamination to prospective buyers as a material fact required by law, and if the seller refuses to permit disclosure, withdraw from the listing

Environmental contamination such as a leaking underground storage tank is a material fact that must be disclosed to prospective buyers under California law, including the Transfer Disclosure Statement requirements and the agent's independent duty under Civil Code §2079. An agent's fiduciary duty of obedience to the client does not extend to participating in illegal acts or fraud — this is a well-established limitation under California agency law. If the seller insists on concealing a known material defect, the agent's only lawful course of action is to withdraw from the listing rather than become complicit in the fraudulent concealment. Continuing to market the property while knowingly concealing a material fact exposes the agent to disciplinary action under Business and Professions Code §10176 and civil liability.